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EEOC Turns Up the Heat on Employer Wellness Plans

Adding to a flurry of recent activity (see here and here), the EEOC has challenged the wellness plan maintained by Honeywell International, alleging that it violates both the ADA and GINA. The EEOC is seeking a preliminary injunction against Honeywell that would stop further implementation of the plan.

Plan Terms. Based on the facts described in the EEOC’s court filings, Honeywell employees are asked to undergo a biometric screening that includes a blood draw. If the employee has family coverage, the employee’s spouse is asked to complete the biometric screening as well. If employees (or their spouses) do not complete the screening, they pay a “surcharge” on their annual premium of up to $2,500 (a base surcharge of $500, plus tobacco-related surcharges of $1,000 for individual coverage or $2,000 for family coverage). They also lose up to $1,500 in employer contributions to an HSA.

ADA - Voluntariness. The EEOC’s argument under the ADA is that the biometric screening under Honeywell’s plan is not voluntary and, thus, is a prohibited medical examination. Although employees are not required to submit to the biometric screening, the premium surcharges and lost HSA contributions are enough to render the screening involuntary.

ADA - Underwriting Safe Harbor. The EEOC also argues that the wellness plan is not protected by the ADA’s underwriting safe harbor. That safe harbor permits “establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on      Continue Reading...

Kansas Supreme Court Describes “Tool” to Determine Employment Status under KWPA

In a new case, the Kansas Supreme Court, for the first time, has specifically identified the test to determine employment status under the Kansas Wage Payment Act (KWPA). The Court ruled, in what it called a “close-call decision,” that delivery drivers for FedEx Ground Package System, Inc. (FXG) were employees, not independent contractors, even though the drivers had contractually agreed that they were independent contractors.   

This case came to the Kansas Supreme Court via litigation in Indiana. FXG drivers throughout the country filed several class-action lawsuits against the company, alleging that they were employees, not independent contractors, under various state and federal laws. The class actions were consolidated and transferred to a federal district court in Indiana. The Kansas class action was designated as the lead case. 
The Kansas class claimed that they were employees under the KWPA, and thus entitled to repayment of costs and expenses that they expended on behalf of FXG. They also sought unpaid overtime wages.
The Indiana court ruled that the drivers were independent contractors under the KWPA, and thus ruled in favor of FXG. The drivers appealed to the Seventh Circuit Court of Appeals. But the Seventh Circuit was “unsure” which test it should use to determine whether an employment relationship exists under the KWPA. So it asked the Kansas Supreme Court to decide what test applies and whether the drivers were employees under the KWPA.
The Kansas Supreme Court adopted a 20-factor test to determine employment status under the KWPA. This test is a modified version of a 20-factor test,      Continue Reading...
Royals, Royals, Royals

Kansas City Royals baseball fever has spread like the plague. So I'm taking advantage of that to sucker you into reading this article with my headline. As a lifelong and long-suffering Royals fan, I have savored every pitch, every hit, and every catch of this year's magical playoff run to the World Series. It's been fun to see general manager Dayton Moore's vision for building a championship team come to fruition. That reminded me of an article I wrote a couple years ago about the lessons HR managers can learn from big league baseball and the Royals. (Who knew I was such a visionary?!) Here's an updated version of that article. 

As a faithful Kansas City Royals fan, I’ve closely followed general manager Dayton Moore’s efforts over the past several years to assemble a winning team with a limited budget. Watching “the process,” as some call it, I’ve come to realize that in many ways general managers are baseball’s version of human-resources managers.

Professional baseball is not just a game; it’s big business. And the general manager (GM) is the central figure in putting together coaches and players to create a successful team.
The GM is hired by and reports to the owners. Working together with ownership, the GM is responsible for all personnel decisions, such as which coaches and players to hire and fire. Gleaning information from scouts and coaches, the GM decides which players to draft, trade for, pursue in free agency, or re-sign. The GM then must negotiate salaries and contract terms. Once players are signed,      Continue Reading...
CMS FAQs Clarify HIPAA Health Plan Identifier (HPID) Requirement

Health plans, including some employer-sponsored plans, face a looming deadline to obtain a HIPAA health plan identifier (HPID). There have been many questions surrounding this requirement, particularly as it applies to employer-sponsored plans. Recent FAQ guidance from CMS (here) has provided some key clarifications, although questions remain. Here's what you need to know.

Background. HIPAA requires health plans and other covered entities to engage in certain covered transactions in a standardized way. This is sometimes referred to as the HIPAA "transactions rule." The details of that rule are beyond what can be addressed here. But the key thing to understand is that the ACA amended the transactions rule to require health plans to obtain a specific identifier (the HPID) to be used in connection with covered transactions.

Deadline. For plans that are required to get an HPID, the deadline is November 5, 2014, unless the plan is a "small" health plan, in which case the deadline is November 5, 2015.

Small Health Plan. A small health plan is a plan that has $5 million or less in annual receipts. The CMS FAQs tell us that annual receipts mean premiums paid during the last full fiscal year, in the case of fully insured plans, and health care claims paid during the last full fiscal year, in the case of self-insured plans. Plans that are partially insured and partially self-insured combine the premiums and health care claims paid to determine their total annual receipts.

Stop-Loss Premiums. It's not clear whether annual receipts are intended to      Continue Reading...

EEOC Challenges Another Wellness Plan Under the ADA

The EEOC has announced (here) the filing of another lawsuit challenging an employer’s wellness plan on the basis that it violates the ADA. Like a similar case filed in August (see coverage here), the EEOC alleges that the employer’s plan fails under the ADA because it is not a voluntary program.

Background. The wellness plan at issue in this case sounds fairly typical. Employees apparently were asked to submit to a biometric screening and complete a health risk assessment. So far, so good. But employees who declined to participate in the wellness plan are said to have had their health plan coverage canceled or to have been required to pay 100% of the cost of coverage under the employer's health plan. By comparison, employees who participated in the wellness plan were only required to pay 25% of the cost of coverage under the employer's health plan.

Something Doesn’t Add Up. The facts as stated by the EEOC aren’t totally consistent. First they say health-plan coverage was canceled when employees declined to participate in the wellness plan. Then they say higher health-plan costs were shifted to employees who declined to participate in the wellness plan. It can’t be both - at least not for the same employees. So we may not have a clear picture of the plan in question at this point.

Voluntariness. But whatever the facts may be, we can see that the EEOC is clearly focused on voluntariness. According to the press release: “Having to choose between complying with      Continue Reading...

New 125 Plan Election Change Addresses Key ACA Concern

Employers considering the look-back measurement method to identify full-time employees for purposes of the ACA’s employer shared responsibility mandate have expressed concern about the impact on employees who are treated as full-time for a stability period but experience a reduction in actual hours of service.

Locked-In Status. Employers recognize that these employees may prefer to drop employer-sponsored coverage upon the reduction in hours. But employers that want to avoid penalty exposure under the ACA must continue to make these employees eligible for coverage, because they are recognized as full-time. And because there is no loss of eligibility, the employees cannot make a voluntary decision to drop coverage in the middle of the year. There is no change in status that will support an election change under the existing 125 plan regulations. The employees are locked-in.

New Election Change. A recent notice from the IRS provides important relief from this problem by adding a new election-change event to the cafeteria-plan rules. An employee can now make a mid-year election to revoke health plan coverage (not including health FSA coverage) upon a reduction in hours of service, if the following conditions are satisfied:

  1. The employee has been in a full-time position and changes to a position that is reasonably expected to average less than 30 hours of service per week, even if that change does not result in a loss of health plan eligibility.
  2. The employee represents to the employer that the employee (and any related individuals who also lose coverage) intend      Continue Reading...
PCORI Fee Increases Slightly

The IRS has announced that, for plan years ending on or after October 1, 2014 and before October 1, 2015, the Patient Centered Outcomes Research Institute Trust Fund tax (or "PCORI fee") will be $2.08 per covered life, up slightly from the rate of $2.00 per covered life that applied for plan years ending on or after October 1, 2013 and before October 1, 2014.

For insured plans, the PCORI fee is paid by the insurance carrier, but for self-insured plans, the plan sponsor (typically the employer) is responsible for calculating and paying the fee. Payment of the fee is due by July 31 of the year following the calendar year in which the plan year ends. Thus, for example, for plan years ending in 2014, the PCORI fee is due by July 31, 2015. IRS Form 720 must be filed along with payment of the fee.

The announcement (Notice 2014-56) is available here.

HHS Addresses Same-Sex Spouses Under HIPAA

The HHS Office for Civil Rights (OCR) has provided guidance on the status of same-sex spouses under the HIPAA privacy rule.

In light of the Supreme Court's Windsor decision, same-sex spouses are recognized as lawful spouses for purposes of all federal law, including HIPAA. Under the HIPAA privacy rule, spouses are "family members" of a protected individual, which is relevant for at least the following two purposes:

  • Under certain circumstances, a covered entity (including a health plan) is permitted to share an individual's protected health information with the individual's family members. The guidance makes clear that a family member includes an individual's same-sex spouse.
  • The privacy rule prohibits health plans from using or disclosing genetic information for underwriting purposes. Genetic information includes, for example, genetic tests of an individual's family member or information regarding the manifestation of a disease or disorder in an individual's family member. The guidance makes clear that a family member for this purposes also includes an individual's same-sex spouse.

An individual's same-sex spouse may also qualify as the "personal representative" of an individual under the privacy rule, which, among other things, would allow the same-sex spouse to act on behalf of the individual in some circumstances. OCR indicates that further clarification regarding treatment of same-sex spouses as personal representatives will be forthcoming.

The bottom line for health plans and other covered entities is that same-sex spouses will be treated the same as opposite-sex spouses for purposes of the HIPAA privacy rule, just as they are under other provisions      Continue Reading...

Facebook “Like” Protected Concerted Activity

On August 22, 2014, the NLRB found that a Connecticut sports bar illegally terminated employees that criticized their employer’s handling of payroll taxes on Facebook. One employee “liked” a comment posted by a former employee that said “Maybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money …. Wtf!!!!” The other added to the post, stating “I owe too. Such an asshole [referring to the owner].” The NLRB rejected the employer’s argument that such behavior was disloyal and disparaging beyond the protection of the act. Rather, the Board found this activity protected under the NLRA.  

The Board also found in a 2-1 decision that the bar’s “Internet/Blogging” policy interfered with employees rights under the NLRA. The policy banned “inappropriate discussions about the company, management, and/or co-workers.” Such an imprecise ban could reasonably be understood by employees to prohibit NLRA-protected activity. 
IRS Issues Key Regulations on Cash-Balance Pension Plans

The IRS released two new regulation packages today dealing with "cash balance" and other "hybrid" pension plans.They provide some important clarifications on implementation of the "market rate" requirement enacted in 2006 as part of the Pension Protection Act. The market-rate requirement ensures that cash-balance plans do not discriminate against older workers by crediting interest at an unreasonably high rate.

Final Regulations. One package of rules finalizes (at long last) market-rate-of-return regulations under Code Section 411(b)(5) that were proposed in 2010. Among other things, the regulations identify the types of interest-crediting rates that will be considered market rates of return, including:

  • the 430(h)(2)(C) segment rates (adjusted or unadjusted),
  • the actual rate of return on plan assets (if conditions are satisfied),
  • the rate of return on certain regulated investment companies (RICs), and
  • a fixed rate of up to 6% (increased from 5% in the proposed regulations).

Interest Rate Floors. The final regulations address the use of an annual or cumulative floor on a variable interest-crediting rate and allow for a floor of up to 5% annually (increased from 4% in the proposed regulations) in connection with any Notice 96-8 rate (e.g., the yield on 30-year Treasury Constant Maturities) and a floor of up to 4% annually in connection with any of the 430(h)(2)(C) segment rates. An investment-based interest-crediting rate (including the rate of return on plan assets) cannot be subject to an annual floor, but may be subject to a cumulative floor of up to 3%.

Other Section 411 Issues. The final regulations also address      Continue Reading...

Similar in Their Ability or Inability to Work

Although pregnancy is not a disability within the meaning of the Americans with Disabilities Act (“ADA”), according to the EEOC’s new Enforcement Guidance under the Pregnancy Discrimination Act (“PDA”), pregnant workers must be treated the same as other employees who are similar in their ability or inability to work. For example, if an employer accommodates a disabled worker’s need for more frequent use of the restroom during work hours, it must also provide this option to pregnant workers in need of more frequent restroom breaks.  

Additionally, the new enforcement guidance states that employers may not rely on policies that distinguish between employees based on the source of an employee’s limitation. For example, many employers offer light duty work to workers injured on the job, but do not provide this benefit for workers injured off duty. According to the EEOC, even though a pregnant worker’s condition did not arise on the job, she must be given light duty on the same basis as employees injured on the job. 
How far does the PDA reach?

It is not an uncommon perception to assume the Pregnancy Discrimination Act (“PDA”) protects women who are pregnant or recently gave birth. The enforcement guidelines, however, clarify that the PDA is not so limited. Rather, the list of individuals protected by the PDA includes, all women who are currently pregnant, were previously pregnant, are intending to become pregnant, may potentially become pregnant, or have experienced medical conditions related to pregnancy or childbirth. Essentially, if a person has the capability of becoming pregnant, regardless of intention, or has ever been pregnant, they are covered by the PDA. 

The EEOC provides specific examples where employers may be found to have violated the PDA. According to the enforcement guidance, an inference of discrimination may be raised where an employee is penalized for taking time off from work to undergo a surgical impregnation procedure. The EEOC also states that an employer may violate the PDA by providing health insurance that excludes coverage of prescription contraceptives. Health insurance plans must cover prescription contraceptives on the same basis as prescription drugs, devices, and services, used to prevent the occurrence of other medical conditions. Employers are not required to offer coverage for elective abortions. But, employers may not terminate an employee for having or contemplating having an abortion. Additionally, employers may not discharge female employees using contraceptives to avoid pregnancy. 
EEOC Files ADA Lawsuit Over Employer Wellness Plan

The EEOC has filed a lawsuit against a Wisconsin employer, alleging that the employer's wellness plan violates the ADA. According to the EEOC's press release (here), this is the first lawsuit by the EEOC directly challenging a wellness program under the ADA.

Background. Although wellness plans are increasingly common, they raise a complex array of legal issues. Regulations addressing compliance with the HIPAA nondiscrimination requirements are well-developed now. But there is virtually no guidance addressing the manner in which the ADA applies to wellness plans. In particular, the ADA prohibits employers from requiring employees to undergo involuntary medical examinations, unless those examinations are clearly job-related, and it has never been clear where the line is on "voluntariness."

Bad Facts. Unfortunately, the facts of this case are bad enough that it may not provide much meaningful guidance. The EEOC's lawsuit alleges that the employer in this case required employees to participate in its wellness program (including what sounds like a fairly typical health questionnaire and biometric screening) and penalized those who refused by requiring them to pay 100% of the cost of coverage under the employer's health plan, plus a $50/month surcharge. Additionally, there is an allegation that the employer then terminated an employee for declining to participate in the wellness program.

Results Not Typical. All of these facts, if true, go well beyond what most typical employer wellness programs require or impose and would seem to be a fairly clear violation of the ADA's voluntariness requirement. So it's not clear how much this      Continue Reading...

Happy Labor Day!!!

We hope that each of you enjoyed your Labor Day holiday.  Now that school is back in full swing and the summer has come to an end, it is time to focus on the short period between now and year end.  Most employers have a busy HR schedule as we move towards the end of the year.  Now is a good time to step back and consider any of your employment practices goals before that busy rush to year end begins.  Take this opportunity to look over your HR policies and practices and ensure your handbooks are up to date.  If you haven’t trained your employees on your anti-harassment policies in sometime, now is a good time to get that on the calendar and completed.  If you dig a little deeper, it probably wouldn’t hurt to do some I-9 auditing and employee classification reviews.  As they say, the work of the HR professional is never done.    

Halbig Decision Shouldn't Change Employer Planning for ACA Implementation

The recent decision by the Court of Appeals for the D.C. Circuit in Halbig v. Burwell (here) is certainly a major development in the ongoing saga of health care reform implementation. If it holds up, it would have a significant impact on the ACA as a whole, since both the employer and individual mandates are affected by the presence (or absence) of premium-assistance tax credits.

But this likely isn't the end of the line for tax credits in federally facilitated exchanges (which currently includes the Kansas exchange). The result in the case was not unexpected, given the makeup of the 3-judge panel. And there is a further expectation that the case will be given reconsideration by the full D.C. Circuit, which may lean the other way. (The government's lawyers have already requested such reconsideration.) So the decision could be short-lived.
Even if the decision stands, the Fourth Circuit's opposing decision in King v. Burwell (here) creates a "circuit split" on the issue, making the issue ripe for Supreme Court review. And we know the Supreme Court has been creative in its interpretation of things related to the ACA, like what is or isn’t a “tax." Concluding that the statutory reference to state-based exchanges really means either a state-based exchange or a federally facilitated exchange might not be a big stretch.
It's also unclear what immediate precedential impact (if any) the case has. The ruling would be controlling in the D.C. Circuit, but it may have limited impact outside of the circuit,      Continue Reading...

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Don Berner, the Labor Law, OSHA, & Immigration Law Guy
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