Confederate Flag Considered as Evidence in Hostile Work Environment Case

By Ann Holden Kendell

On June 17, 2014, the United States Court of Appeals for the 11^th Circuit issued a ruling in which the Confederate flag was considered as evidence in the “totality of the circumstances” whether racially harassing conduct was sufficiently severe or pervasive to alter the terms or conditions of the employee’s employment and create a hostile or abusive working environment. See Adams v. Austal, U.S.A., LLC, (No. 12-11507, June 17, 2014). While this ruling was not from the 8th Circuit (Iowa’s federal appellate court), the standard applied in the case on “severe or pervasive” conduct is the same as that applied in reviewing Iowa cases on a hostile work environment claim. Opinion found at: http://www.ca11.uscourts.gov/opinions/ops/201211507.pdf

The flag was worn by employees on shirts and belt buckles, as well as displayed by employees. There were many other pieces of evidence in this case, too, including racial graffiti in the restroom, nooses and the utterance of racial slurs. The employer repeatedly cleaned the bathroom walls of graffiti for years until it decided to paint the walls black, which did decrease the frequency of the graffiti. It’s unlikely that display of the Confederate flag alone would be sufficiently “severe or pervasive” conduct to support a hostile work environment claim; however these cases are very fact specific – perhaps painting a huge Confederate flag on the locker of the only African-American employee would be enough.  (Seems severe and pervasive).

What this means for Iowa employers – Employers need to be aware of the phrases and symbols being used by employees and their potential meanings. While the Confederate flag is not likely a mystery to anyone who has taken a class in U.S. History, there are phrases and symbols that are not as well known or understood. For example, apparently “88” can be used as code for “Heil Hitler.” (“H” is the 8^th letter of the alphabet.) If an issue is raised by an employee on a comment or symbol that is unclear to the employer, the employer should – carefully – inquire about the specifics as to how the comment or symbol offended the employee without implying that the employee should not be offended. 

[PRACTICE POINT: Don’t phrase it as, “Why would that bother you?” as that could indicate that the employer thinks the conduct was not offensive. Instead, state something along the lines of: “Tell me all the concerns you have about [the comment/symbol] as I want to make sure that I understand,” or “I’m not familiar with what that means.”]

This case also highlights the importance of good written policies regarding: harassment and discrimination, the need for employees to report issues, the reporting process and a prohibition on retaliation to protect employees who make complaints or participate in investigations. If employees don’t know how to report issues or know they will be protected if they do so, these types of issues may continue.

If you have questions about employment policies and practices regarding discrimination and harassment, you should contact your BrownWinick employment law attorney.

Supreme Court Strikes Down President's NLRB Recess Appointments

By Megan Erickson Moritz

The US Supreme Court today ruled that President Obama lacked authority to appoint three National Labor Relations Board members in 2012 during a short Senate break.  All nine Justices agreed the President's so-called "recess appointments" were unconstitutional.  This ruling impacts -- and probably invalidates -- hundreds of Board decisions that have been issued since the unconstitutional appointments.  There will surely be more to come as we unravel the impact of this important case.

The National Labor Relations Board v. Noel Canning decision is available here.

DOL to Expand FLSA Overtime Protections

By Megan Erickson Moritz

On March 18, 2014, President Obama directed the United States Secretary of Labor to “modernize and streamline” existing regulations regarding exemptions from the federal Fair Labor Standards Act (FLSA) overtime requirements.  The President’s Memorandum described the current regulations as “outdated,” indicating the overtime protections afforded under the FLSA should be expanded to cover more employees.  The President instructed the Department of Labor to “consider how the regulations could be revised to update existing protections consistent with the intent of the Act; address the changing nature of the workplace; and simplify the regulations to make them easier for both workers and businesses to understand and apply.”

Although the details of any forthcoming changes remain unclear, it is clear that the intent behind the proposed regulations is to make more workers eligible for overtime compensation.  These changes will likely have a significant impact on employers, and may well trigger an upsurge in wage and hour litigation.  The new regulations would not take effect for a year or more, as there are a number of steps in the rulemaking process, and we will keep you posted as more information becomes available.  

More Delays to the Healthcare Reform Employer Mandate

By Cynthia Boyle Lande

On February 9, 2014, the IRS issued final regulations to the Affordable Care Act’s employer mandate (often referred to as “play or pay”). The employer mandate requires employers who have 50 or more full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees (“FTEs”) to offer to all full-time employees affordable health insurance that provides minimum value. Employers failing to satisfy these requirements may be required to pay a penalty, known as the Shared Responsibility Payment, if any employee receives a tax credit for purchasing insurance through the exchanges.

These requirements were initially scheduled to take effect in 2014. Last summer, the IRS delayed enforcement of the employer mandate until 2015. The final regulations published earlier this month contain transition relief which further delays the effectiveness of the employer mandate. This post provides an overview of the transition relief prescribed under the final regulations.

Medium Employer Transition Relief

Employers who employ between 50 and 99 FTEs during 2014 will not be required to make the Shared Responsibility Payment for 2015 even if they do not comply with the Employer Mandate so long as they meet the following requirements: 

• The employer does not adjust the size of its workforce or hours of service of its employees in 2014 for purposes of having fewer than 100 FTEs; and
• The employer does not eliminate or materially reduce the health insurance coverage in place as of February 9, 2014.

Non-Calendar Year Plans

The final regulations also provided three pieces of transition relief for plans which were in existence on a non-calendar year basis as of December 27, 2012 and have not changed plan year since then: (i) Pre-2015 Eligibility Transition Relief; (ii) Significant Percentage Transition Relief (based on all employees); and (iii) Significant Percentage Transition Relief (based on full-time employees only). The Pre-2015 Eligibility Transition Relief provides that an employer is not subject to the Shared Responsibility Payment so long as the employer offers coverage meeting the affordability and minimum value requirements no later than the first day of the 2015 plan year. For example, an employer with a 2015 plan year beginning on June 1, 2015 will not be subject to the Shared Responsibility Payment so long as the coverage it offers meets the affordability and minimum value requirements beginning June 1, 2015. This transition relief only applies, however, to employees who are eligible to receive coverage as of the first day of the 2015 plan year under the terms of the employer’s plan in effect on February 9, 2014.

The other two provisions provide transition relief even if the employer does not offer coverage to all employees. Whether the employer can benefit from these two provisions depends on whether the employer meets certain requirements regarding the portion of the employer’s employees eligible for coverage.

Modification of Other Requirements

For employers who are subject to the employer mandate in 2015, the final regulations modify coverage and cost requirements under the employer mandate in several ways. First, the regulations modify the percentage of employees that must be covered to avoid a Shared Responsibility Payment for failure to provide coverage. An employer typically will be deemed to offer coverage to all full-time employees if the employer offers coverage to at least 95% of full-time employees. The final regulations provide transition relief replacing 95% with 70% for purposes of this requirement for 2015.

Additionally, the regulations modify the calculation for determining the Shared Responsibility Payment for failure to offer coverage. For purposes of calculating the penalty if an employer fails to offer coverage to at least 70% of its full-time employees, the employer can exclude the first 80 employees when calculating the penalty of $2,000 per employee for 2015. For years after 2015, employers can only exclude the first 30 employees.

Next Steps for Employers

With these final regulations in place, many employers must begin making important decisions about compliance prior to the beginning of 2015. Failure to comply with these requirements can result in substantial penalties for employers. Employers should begin planning and developing a strategy for compliance now. If you have any questions about the information contained in this post or what steps you should take to comply with the Affordable Care Act, you should contact your BrownWinick employee benefits attorney.

Back to Basics: Fixing Common ERISA Mistakes

By Cynthia Boyle Lande

This time of the year many people are working on New Year’s resolutions to break bad habits, learn a new skill, or spend more time with close friends and family.  With year-end deadlines met and the holidays over, now is also a good time for employers to review their benefit plans and make sure they are in compliance with applicable ERISA requirements. (Remember, ERISA often applies to health and welfare benefit plans, not just retirement plans.) We have prepared this summary of some of the most common ERISA mistakes we see to help you with this review.

Following Plan Terms

One of the most common ERISA plan mistakes is a failure to follow the terms of the governing Plan Document. It is easy for plan sponsors to operate a plan based on a combination of memory and intuition and forget that ERISA requires the plan to be operated in accordance with the terms of the Plan Document. Examples of common failures relating to following the terms of a governing Plan Document include the following:

•  Definition of Compensation: Employers have some flexibility in determining what constitutes employee compensation for purposes of things like matching contributions and elective employer contributions. Compensation may or may not include bonuses, commissions, or other amounts separate from an employee’s base pay. Notwithstanding the fact that employers have discretion to determine what is or is not part of compensation, they must ensure that their actual practices for defining compensation comply with the definition under their Plan Document.
•  Eligibility Requirements: While ERISA (and, in the case of group health plans, the Affordable Care Act) limit employers’ ability to impose employee eligibility requirements, employers often choose to exclude certain employees from their benefit plans. Employers must ensure that in addition to complying with ERISA and the ACA these eligibility restrictions comply with the terms of the applicable Plan Document.
•   Hardship Distributions and Plan Loans: Retirement plans may make hardship distributions and loans to participants, but only in limited circumstances. Failure to follow ERISA and IRS requirements relating to these distributions and loans can have negative consequences for the plan and the participant receiving the distribution or loan. Additionally, plan sponsors can only make these distributions and loans as authorized under the terms of the applicable Plan Document.

 Maintaining Plan Document and Summary Plan Description.

One of the other most common ERISA mistakes is a failure to maintain Plan Documents and other required documentation.  ERISA plans, including most health and welfare benefit plans, are required to maintain a Plan Document and Summary Plan Description (or SPD). Failure to maintain these documents or to provide them to a participant when requested can result in substantial statutory penalties. 

Additionally, plan sponsors are required to regularly update the Plan Document and SPD based on changes in the law or plan terms. Failure to make these changes can similarly result in significant statutory penalties. Updating the Plan Document and SPD can also help ensure that the plan sponsor is following current ERISA and other requirements.

As with other significant business actions, plan sponsors should make sure that the Plan Document, SPD, and amendments are properly adopted, typically in the form of board or manager resolutions. On audit the Department of Labor or Internal Revenue Service will often expect the plan sponsor to be able to provide originals of these resolutions showing that the Plan Document, SPD, and amendments were properly adopted. 

***

The best approach for dealing with these common ERISA mistakes is to ensure that they never happen. In the event that they do, it is best to correct the mistakes, in accordance with correction procedures approved by the Department of Labor and IRS, as quickly as possible. If you find yourself identifying with any of these common mistakes, or if you have any question about how the general requirements described in this post apply to your plan, you should contact your BrownWinick employment practice group attorney. 

Is OSHA's Proposed Rule On Improving Tracking of Workplace Injuries and Illness Really an Improvement?

By Brent D. Soderstrum
On November 8, 2013, the Occupational Safety and Health Administration (OSHA) proposed a new rule entitled "Improving Tracking of Workplace Injuries and Illness."  Under this proposal:

1.    Certain establishments with at least 250 employees will be required to electronically submit their OSHA Form 300 on a quarterly basis to OSHA.

2.    Certain establishments with at least 20 employees will be required to electronically submit their OSHA summary form 300A on an annual basis to OSHA.

3.    Upon request from OSHA, certain employers will be required to submit specific information about cases from their OSHA 301 incident report.

4.   Data from the 300A and 300, except the employee's name, will be available to the public via the Internet.

The biggest concern about the proposed rule is that data that was previously available only to an OSHA inspector in reviewing an employer's OSHA 300 and 300A logs would now be available to the public for viewing on the Internet.  This will no doubt cause many employers to be much more careful with their recordkeeping, resulting in selective recording of injuries and illnesses.  The public posting of this information will also likely lead to employers being targeted by outside groups who characterize these employers as having bad safety records. 

Posting this information serves the public little good; it can be easily misinterpreted and lead to unfair conclusions or judgments about an employer or a particular industry.  I am afraid that this will lead to many employers doing everything within their power to not report workplace injuries because it will then become public information.  The injury and illness data that is going to be made public by the proposed rule will not include information that explains how the injury occurred, such as whether an employee acted in an unsafe manner or failed to follow an employer's safety rules.  This incomplete information that OSHA intends to make public may allow competitors, plaintiff attorneys, unions, and others to distort the information and wrongly label employers as unsafe or bad actors.

If anything concerns you regarding this proposed rule, OSHA will be accepting written comments regarding the proposed rule through March 8, 2014.  

        

E-Verify Participation and Right to Work Posters and Revised MOUs

By Elizabeth A. Coonan

United States Citizenship and Immigration Services (USCIS) recently announced that it has issued revised Notice of E-Verify Participation and Office of Special Counsel Right to Work posters.  The posters are now available to be downloaded in English and Spanish and include clarified language and corrected formatting. Most notably, the new poster now indicates that E-Verify checks data from driver's licenses and identification cards issued by some states. Prior versions of the poster remain acceptable.

USCIS also recently released revised E-Verify Memorandums of Understanding (MOUs). New E-verify users will be required to sign one of the two the revised MOUs based upon whether the employer uses web services or browser access. Existing E-Verify users will not be required to execute a revised MOU but effective January 8, 2014, existing users will be required to adhere to the terms of the new MOU applicable to their method of access.

Should you have questions about employment eligibility verification or the E-Verify process, please do not hesitate to contact me or the BrownWinick attorney with whom you work. 

Paid FMLA Leave?

By  Elizabeth A. Coonan

On December 12, 2013, democratic lawmakers introduced legislation in both the House  and the Senate proposing a national paid family and medical leave insurance program.  The proposal would establish an insurance program that would be funded by employers and employees and would provide payment to individuals off of work on FMLA leave.  The legislation is structured similar to laws in New Jersey and California. The legislation is expected to fail but is evidence of a growing effort to provide financial relief to injured workers. Stay tuned...  

IRS Issues Final Regulations on Reducing or Suspending 401(k) Safe Harbor Contributions: Employers May Want to Consider Revising Safe Harbor Notices

By Cynthia Boyle Lande

On November 15, 2013, the IRS issued final Regulations covering the reduction or suspension of 401(k) safe harbor contributions. These Regulations build on other final Regulations issued in 2004 and proposed Regulations issued in 2009.

The new Regulations describe the steps that employers must follow to amend a 401(k) to eliminate employer safe harbor contributions mid-year. Employer safe harbor contributions may take the form of non-elective contributions paid entirely by the employer (“non-elective contributions”) or employer contributions which match employee contributions (“matching contributions”). Treasury Regulations typically require that a safe harbor 401(k) plan (whether employer contributions are matching or non-elective contributions) have a 12-month plan year. As a result, employers cannot typically eliminate the safe harbor element from a plan mid-year.

• Provides employees a supplemental notice explaining the suspension at least 30 days prior to the effective date of the suspension and allows employees a reasonable opportunity after receiving the notice to change their deferral elections;
• Continues to make safe harbor matching contributions until the effective date of the amendment; and
• Amends the plan to satisfy ADP and ACP testing (as applicable) and actually satisfies those tests for the entire plan year.

The 2004 Regulations did not, however, allow a similar suspension of safe harbor non-elective contributions.

The new Regulations allow employers to amend 401(k) plans to suspend safe harbor non-elective contributions as well so long as the requirements listed above are satisfied and either of the following is true:

• The employer is operating at an economic loss for the plan year, or

• The employer includes with its safe harbor notice distributed to employees prior to the beginning of the plan year a statement that the employer may amend the plan during the plan year to reduce or suspend safe harbor non-elective contributions so long as the reduction or suspension does not apply until at least 30 days after all eligible employees receive a subsequent notice of the reduction or suspension.

These new Regulations are retroactively effective as of May 18, 2009.

To ensure consistency among various safe harbor 401(k) plans, these new requirements also will apply to safe harbor plans with matching contributions beginning January 1, 2015.

The 2004 Regulations allow employers to amend 401(k) plans to suspend safe harbor matching contributions if the employer does all of the following:

What Employers Should Do:

This Year: Employers with safe harbor 401(k) plans providing for employer non-elective contributions should consider modifying the notice that they will provide to employees prior to the beginning of the next plan year. If an employer making non-elective contributions to a safe harbor 401(k) plan does not include the statement described above in its safe harbor notice for the upcoming plan year, the employer will not be able to reduce or suspend non-elective contributions during the year unless the employer is operating at an economic loss.

Next Year: Employers with safe harbor 401(k) plans providing for matching contributions should consider modifying the notice that they will provide to employees prior to the beginning of their first plan year beginning after December 31, 2014. Beginning January 1, 2015, failure to include the statement described above in safe harbor notices for the upcoming year will prevent employers from reducing or suspending matching contributions during the year unless they are operating at an economic loss.

If you have any questions regarding the new IRS rules on reducing or suspending safe harbor contributions or on 401(k) compliance generally, you should contact your BrownWinick employee benefits attorney. 

E-Verify and Social Security Number Lockout

By Elizabeth A. Coonan

U.S. Citizenship and Immigration Services (USCIS) Director Alejandro Mayorkas announced yesterday that the Federal E-Verify* program has been enhanced to deter fraud by capturing and locking out fraudulently used Social Security numbers.

The new lockout feature prevents potential fraudulent use of SSNs to gain work authorization during the I-9 process. In accordance with normal E-Verify process, an employer will enter an employee’s information into the E-Verify system. If the SSN offered is one that has been locked, E-Verify will issue a Tentative Nonconfirmation (TNC).  The employee receiving the TNC will then need to contact their local Social Security Administration field office to resolve the issue.  The SSN lockout enhancement provides additional protection to employers…but will it end up causing more headaches? Only time will tell.

*E-Verify is a free, voluntary web-based service provided by the Department of Homeland Security that permits employers to verify the employment eligibility of new employees. The use of E-Verify is mandatory for many federal contractors and in several states. E-Verify is not mandatory in Iowa.

If you have any questions about immigration compliance, please contact your BrownWinick Employment Attorney.

Undocumented Workers are entitled to Workers' Compensation in Iowa

By Elizabeth A Coonan

On November 15, 2013, the Supreme Court of Iowa in Staff Management and New Hampshire Insurance v. Jimenez ruled that the Iowa Workers’ Compensation Commissioner can award an undocumented worker healing period benefits under the Iowa Workers’ Compensation Act.  Using the doctrine of “expression unis est exlusio alterius” (don’t worry, we had to look it up too) as standing for the proposition that legislative intent is expressed by omission as well as by inclusion, the Court determined that the definition of “employee” under section 85.61(11) of the Iowa Workers’ Compensation Act is to be read in a broad manner. The court reasoned, “If the legislature intended the definition of a worker or employee to exclude undocumented workers, it would have done so by adding undocumented workers to the list of excluded workers or employees.”

It should be noted that this case dealt only with the issue of entitlement to workers’ compensation benefits, not whether the employer had a legitimate non-discriminatory reason for terminating the undocumented employee. The employee advanced an argument indicating that the employer was aware that she was undocumented when the employee was initially hired. Legally and strategically, this left the employer with no choice but to argue that it was not aware of her lack of work authorization as the knowing employment of an individual not authorized to work in the United States comes with significant risk of fines and penalties.  The moral of this story: Once you have knowledge that a workers is undocumented, you may not continue to employ that individual but he or she may still be entitled to receive workers’ compensation benefits in the State of Iowa.  

If you have questions about workers’ compensation or immigration compliance, contact your BrownWinick employment law attorney.

Anti-Discrimination Law ENDA Passes Senate

By Ann Holden Kendell

On November 17, 2013, the U.S. Senate passed the Employee Non-Discrimination Act (ENDA) – a bill that prohibits businesses with 15 or more workers from making employment decisions based on sexual orientation or gender identity.  Ten Republicans joined with the entire Democrat caucus to pass the proposal 64-32.  A religious exception was provided as an amendment to the bill to "prevent federal, state and local governments from retaliating against religious groups that are exempt from the law."

Citing concerns of frivolous litigation, Speaker Boehner and other House Republicans have already said that they intend to oppose ENDA.  A report from the Government AccountabilityOffice released this summer indicated that in the 22 states where there is some form of anti-discrimination law regarding sexual orientation and gender identity, "the administrative complaint data reported by states at that time showed relatively few employment discrimination complaints based on sexual orientation and gender identity." 

What this means for Iowa employers – the Iowa Civil Rights Act already includes sexual orientation and gender identity as protected classes for purposes of employment discrimination for businesses with four employees or more.  But, with the proposed federal legislation, the heightened awareness and potential federal protections further underscore the need for Iowa employers to review written and unwritten employment policies and practices and include these protected classes in discrimination and harassment training for employees. 

Another practical concern for Iowa employers is to balance the protections for gay and transgender employees with the religious views of other employees.  Religion is also protected under the Iowa Civil Rights Act and Title VII.  Therefore, regardless of the protected class status, managers and employees should not be using any protected class status for purposes of employment decisions or to engage in harassing behaviors. 

If you have questions about employment policies and practices regarding discrimination and harassment, you should contact your BrownWinick employment law attorney.

Unclaimed Property Audits on the Rise

By Katheryn Thorson

With many states in dire need of revenue, unclaimed property audits are on the rise.  Under most states’ unclaimed property laws, a business must remit certain types of property to the state for safekeeping after the business is unable to contact the property’s owner for a specified period.  Additionally, in order to ensure compliance, the laws grant the state the authority to audit businesses, regardless of whether the business has a presence in the state.  If an audit exposes unreported unclaimed property, penalties, interest, and the cost of the audit may be imposed against the business.  With these audits on the rise, businesses should review its procedures and be proactive in reporting unclaimed property.

 

Generally speaking, unclaimed property is property that is owed to a person, but has not been paid because the owner cannot be contacted.  Common examples of unclaimed property are accounts payable, unused rebates, unclaimed insurance proceeds, unused balances on gift certificates or gift cards, and uncashed payroll, benefit, or dividend checks. 

 

While most states’ laws are based on a uniform law, each state’s law may vary as to the types of property that is subject to remittance, the dormancy period for each type of property, and the reporting rules.  Additionally, a business may be subject to several states’ laws as a business generally may be audited in any state.  In order to make reporting easier, rules have been established that determine which state a business must report unclaimed property to.    

 

Typically, an audit begins when the state sends an initial document request to a business.  Audits are usually conducted by third-party auditors that are typically paid on a contingency fee basis, which creates an incentive for the auditors to uncover as much unclaimed property as possible.  Audits can be extremely time-consuming and may last for a period of several months.  If an audit discloses reportable unclaimed property, the state will issue a liability assessment, which may impose penalties, interest, and the cost of the audit against the business. 

 

In Iowa, Iowa Code Chapter 556 regulates the disposition of unclaimed property, and the Treasurer of the State of Iowa handles all unclaimed property matters.  Under Iowa’s law, businesses with unclaimed property must send written notice to the owners and must turn the property over to the state after a designated time period.  The time period varies depending on the type of property unclaimed, but is usually three years after the property becomes payable.  Additionally, businesses with unclaimed property must file an annual report of all unclaimed property with the Treasurer of the State of Iowa.

 

In order to minimize liability if an audit is conducted, your businesses should follow these best practice tips:

• Evaluate the types of unclaimed property that the business may have and what states’ laws the business may be subject to;
• File unclaimed property reports regularly in all applicable jurisdictions;
• Establish written unclaimed property policies and procedures;
• Address unclaimed property in transaction documents;
• Maintain documentation on owners and unclaimed property;
• Take advantage of automatic payment options such as direct deposit; and
• Perform early outreach to owners as soon as payment is available 

Further, if your business receives an audit notice or is concerned about unclaimed property exposure, an experienced unclaimed property attorney and consultants should be engaged.  These professionals can assist in protecting information gathered in connection with the audit and can also assist in identifying defenses.   

 

Lastly, this posting is intended to provide a broad overview of unclaimed property laws and is by no means comprehensive.  In order to obtain guidance on how the unclaimed property laws are applicable to your business, you should contact your BrownWinick employment attorney. 

DOL to Extend Minimum Wage & Overtime to More Home Health Care Workers

By Megan Erickson Moritz

The U.S. Department of Labor announced a final rule on September 17, 2013 that extends the minimum wage and overtime requirements of the federal Fair Labor Standards Act (FLSA) to most home health care workers.  Effective January 1, 2015, the “companionship” exemption of the FLSA will be narrowed, extending minimum wage and overtime protections to millions more certified nursing assistants, home health aides, personal care aides, and other workers offering similar in-home, direct care services to the elderly, injured, or disabled. 

Although the FLSA covers other domestic service workers, it has long-provided an exemption for those who perform certain in-home companionship services.  “Companionship services” are services for the care, fellowship, and protection of those who cannot care for themselves due to advanced age or infirmity.  This has included, for example, meal prep, washing clothes, and general household work.  The amendment narrows this exemption.  Beginning January 1, 2015, many workers offering these in-home care services will be subject to federal minimum wage and overtime requirements.  

Under the new rule, where a home health aide is employed only by the person receiving the services (or that person's family or household) and the worker is engaged in primarily fellowship and protection (i.e., engaging the person in social, physical or mental activities, providing company, etc.), he or she will remain exempt. Third-party employers of home care workers, however, will likely be significantly impacted.

New Employer Wellness Program Regulations Take Effect January 1, 2014

By Cindy Boyle Lande 

The Affordable Care Act (“ACA”) prohibits employers from discriminating between employees based on health status for purposes of eligibility, benefits, or premiums. In June, the Department of Treasury, Department of Labor, and Department of Health and Human Services issued final regulations regarding workplace wellness programs. The new regulations allow an employer to implement a workplace wellness program, notwithstanding the fact that the employer will provide certain benefits to employees who do participate in the wellness program but not to employees who do not participate -- so long as the program meets certain conditions.

The requirements that will apply to a wellness program depend on the type of the wellness program. The new regulations divide wellness programs in to three categories:

1. Participatory Wellness Programs: These programs reward participants for participating in a health-promoting activity such as joining a gym, completing a diagnostic testing or health coaching program, or scheduling regular preventative care appointments, without consideration of whether the participant meets any specific health-related standard.
2. Activity-Only Wellness Programs: These programs reward participants for engaging in activities related to a specific health standard, such as walking or exercising a certain number of times per month. Rewards under activity-only wellness programs are not based on the specific health outcome of such activities.
3. Outcome-Based Wellness Programs: These programs reward participants for achieving a specific health standard or outcome, such as losing thirty pounds or testing at a “normal” level on biometric tests such as blood pressure or BMI.

Employers offering only participatory wellness programs must offer participation to all similarly situated individuals, regardless of their health status. Employers offering activity-only or outcome-based programs must meet additional requirements because the risk of discrimination between employees based on health status is greater under those programs. Those requirements are, generally:

1. Frequency of Opportunity to Qualify: The wellness program must allow participants to qualify for the program reward at least once each year.
2. Size of Reward: The total reward resulting from satisfying health-contingent standards under the program may not exceed 30% of the total insurance premium for the person(s) covered under the program. This percentage is increased to 50% to the extent that the increase in the reward is the result of a program related to smoking cessation.
3. Reasonable Design: The program must be reasonably designed to promote health or prevent disease. This requirement considers a variety of program-specific facts, including the burden to participants, the likelihood of program success, and whether the program is a cover for discriminating between employees based on health status.
4. Reasonable Alternative Standard: The program must provide a reasonable alternative standard for any individual who cannot meet a required standard or has been advised by a doctor that it would be dangerous to try to meet the standard.
5. Notice of Availability of Reasonable Alternative Standard: In addition to offering a reasonable alternative, the program must notify participants, in all materials describing the terms of the wellness program, that reasonable alternatives are available and the program will respect the recommendations of a participant’s primary physician.

These new requirements take effect beginning January 1, 2014. Unlike other provisions under the ACA, the employer wellness program requirements apply to both grandfathered and non-grandfathered plans. As a result, all employers currently offering a wellness program or considering implementing a wellness program should review their wellness program to make sure it complies with the new regulations.

This posting is intended to provide a general overview of the requirements under the new wellness program regulations, and is by no means exhaustive. You should contact an experienced benefits attorney for guidance on how the new requirements apply to you.