Kansas Employment Law Blog

In its much-anticipated decision yesterday, the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA), putting an end to the constitutional challenges that have threatened the law since the day it was enacted.

The manner in which the law was upheld came as a surprise to many. Rather than conclude that the law reflected a constitutional exercise of Congress's commerce power, the Court seized upon the government's back-up argument and upheld the law as a valid exercise of Congress's taxing power. And in a further twist, it was Chief Justice John Roberts, generally viewed as a political conservative, who cast the decisive vote, siding with four justices who are generally considered political liberals.

Although the legal underpinnings of the Court’s decision are somewhat complex, the bottom line for employers is clear: Nothing has changed. The law that went into effect March 23, 2010, and has been in effect ever since, remains intact.

In theory, this means employers should not need to do anything more than maintain business as usual, continuing their efforts to implement the law as its provisions become effective. But in reality many employers will have been sitting on the sidelines, waiting to see how the case would be resolved. Those employers may now find themselves playing catch-up.

In the short term, employers need to be preparing to comply with new measures that are coming into effect in the next few months—things like the uniform summary of benefits and coverage (SBC), the PCORI trust-fund taxes, W-2 reporting, and the $2,500 Continue Reading...

OSHA recently announced a national emphasis program that targets nursing homes and residential care facilities. The program is being implemented due to the higher than average injury and illness rates within the industry. Employers falling within the covered NAICS Codes (used to be SIC Codes) should expect to see a visit from OSHA in the coming year. For more information on the OSHA emphasis program click here.

The Major League Baseball All-Star Game will be played in Kansas City in less than two weeks. Inspired by the occasion, this edition of the Kansas Employment Law Bog Email Update features several baseball-themed articles.

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, the GM is ultimately in charge of overseeing their development. And, on the back side, the GM decides when to cut or trade under-performing or overpriced players. All of this, of course, must be done within salary constraints (unless you work for the Yankees). That sounds a lot like what most high-level HR managers do, doesn’t it?

Netflix is a company that embraces the concept of managing its personnel like big-league ballplayers. Netflix tells employees, “We’re a team, not a family.” But not just any team. “We’re like a pro sports team, not a kid’s recreational team.” Accordingly, Continue Reading...

This post originally appeared in March 2011.

Major League Baseball opens the season this week, and I have baseball on my mind. Which makes me think about the great baseball philosopher, Yogi Berra. Here are some of the most-memorable "Yogi-isms," and what human resources professionals and personnel managers can take away from these pearls of wisdom.

“You’ve got to be careful if you don’t know where you’re going 'cause you might not get there.” Let’s face it, employment law is complicated. You need to understand the law, and get help from your lawyer when you don’t, to know where it is you want to go (unless you want to go to the courthouse).

“We’re lost, but we’re making good time.” Activity is not the same as progress. Once you know where you want to go, make a plan and set specific and measurable goals to get you there.

“It’s déjà vu all over again.” If you keep doing the same things you’ll keep getting the same results. Study best HR practices and take advantage of what others have already figured out. Join a professional organization, go to seminars, and talk to contemporaries at other companies. If you need help deciding how to deal with a dilemma or improve your policies and procedures, confer with an experienced employment lawyer or HR consultant—chances are they’ve seen it and done it all before.

“You can observe a lot Continue Reading...

Ken Burns’s documentary The Tenth Inning artfully chronicles the history of Major League Baseball from 1994 (picking up where his original Baseball left off) to 2010. One segment of the film covers baseball’s “steroid era,” including fans’ mixture of ambivalence and cynicism as a chemically enhanced Barry Bonds chased and surpassed Hank Aaron’s all-time home run record in 2006. “The whole thing was a joyless march to the inevitable,” as Bob Costas put it.

Costas’s colorful turn of phrase – “joyless march to the inevitable” – stuck in my head. The expression reminds me of a phenomenon I see all too often: employers needlessly putting off the termination of an employee who needs to go. I understand why employers do this—avoiding unpleasantness, procrastination, unfounded hope the employee will “turn it around,” slack managers who neglect to pave the way for a clean discharge, etc. Yet I still ask myself, why do employers do this?

Let’s move on from baseball to another Ken Burns documentary topic, the Civil War. Union General George McClellan was much-maligned for his failure to take action. His critics, including President Lincoln, believed he was too cautious and made excuses for not engaging the enemy when the time was right. McClellan had the chance to capture Confederate General Robert E. Lee’s army and end the war in 1862, but he delayed and let Lee escape, resulting in three more years of bloody conflict. Lincoln famously said that Continue Reading...

Jim Joyce became a Major League Baseball umpire in 1987. During his career he had been selected to umpire a Division Series six times, a League Championship Series three times, the World Series twice, and the All-Star Game twice.

In short, he was very good. But on June 2, 2010, he wasn’t.

That night Joyce was the first-base umpire in a game between the Detroit Tigers and Cleveland Indians. Tigers pitcher Armando Galarraga had a perfect game (no base runners allowed) going with two outs in the ninth inning. The batter hit a weak grounder and was thrown out at first, completing the perfect game.

Except that Joyce called the batter safe. Replays showed he was clearly out. The mistake prevented Galarraga from becoming only the 21st pitcher in Major League history, and the first Detroit player in the team’s 110-year history, to throw a perfect game.

The initial reaction to Joyce’s blown call was expectedly vitriolic. But what followed was decidedly unexpected and wonderful.

Rather than run from the situation or defiantly defend his error, Joyce met with Galarraga and the media after the game. With tears in his eyes, he earnestly admitted his mistake and apologized. “I just cost the kid a perfect game,” he said. Galarraga was forgiving and told reporters, “Nobody’s perfect.”

In the days that followed, Joyce was praised throughout the sports world for showing accountability and regret. Other players came forward to defend Joyce, and two weeks later he was voted best umpire in Major League Baseball in an ESPN player poll. Joyce and Galarraga later wrote a book Continue Reading...

The T206 Honus Wagner is considered the Holy Grail of baseball cards. The card is so rare and coveted by collectors that one in mint condition fetched $2.8 million in 2007.

The American Tobacco Company (ATC) issued the cards in cigarette packs in 1909. But Wagner, one of the best players at the time, had refused to give ATC permission to use his image on the cards. (Most likely it was because he was anti-tobacco, but it might have been because he wanted more money--the exact reason is lost to history.) So Wagner threatened to sue and forced ATC to recall the cards. ATC thus ended production of the Wagner card, but only after 60 to 100 of the cards got out to the public. About 50 of them are known to still exist. That scarcity is the reason for the mind-boggling value of the card.

What does a 103-year-old baseball card have to do with employment law? Kansas has long recognized a common-law action for invasion of privacy. The right of privacy actually consists of several distinct rights, one of which is protection from “appropriation.” The Honus Wagner card is a perfect example of appropriation: one person or entity uses another person’s name or image, without permission, to advertise its business or product. Appropriation claims can arise from the employment relationship if the employer uses pictures of an employee in advertising or promotional materials without consent.

The Kansas Supreme Court first recognized a cause of action Continue Reading...

The IRS recently released Revenue Ruling 2012-18, which provides updated guidance for employers on the treatment of employee tips for FICA-tax purposes.

Tips are subject to both the employer's and the employee's share of the FICA tax, even though they are not paid directly from the employer to the employee. Special procedures govern how employees report tips to employers and when employers must withhold and pay the required FICA taxes on those tips.

Among other things, the new guidance clarifies the distinction between tips and service charges. Service charges, such as automatic gratuities added to a bill for large parties, are not tips for FICA purposes and may not be reported using the special procedures that apply to tips. They must be treated like other wages paid by the employer. This means, for example, that they are subject to FICA-tax withholding at the time they are paid to the employee.

In a related announcement, the IRS has released a memorandum to field agents providing instruction on audits of businesses where tipping of employees is customary. The memorandum says that, in general, the principles in Revenue Ruling 2012-18 are retroactively effective. But in certain cases it may be appropriate for auditors to apply the new guidance on service charges prospectively from January 1, 2013, "in order to allow businesses not currently in compliance additional time to amend their business practices and make needed system changes."

Although this announcement indicates the possibility of some relief for employers that have not handled service charges in the Continue Reading...

The Department of Labor (DOL) has opined that a large 401(k) plan covering over 9,800 employees of 500 different employers is not a single retirement plan, but rather is a collection of separate plans established by each participating employer.

The plan was set up as a "multiple employer plan" and referred to as an "open MEP" because the employers adopting the arrangement were not related to each other by ownership, industry, or any other unifying factor. The DOL concluded this lack of "genuine organizational relationship" among the employers was fatal to the intended treatment of the plan as a single plan.

Although this opinion does not impair the tax-qualified status of open MEPs, it does mean that employers participating in open MEPs will be required to separately comply with the standards imposed under ERISA, such as the plan document, summary plan description, and Form 5500 requirements. In addition, each employer is treated as a fiduciary under ERISA and is charged with, among other things, prudently selecting and monitoring investment and service providers, including the sponsor of the open MEP and its affiliated service providers.

In light of this opinion, employers considering an open MEP should carefully evaluate the extent to which participation in the plan will, in fact, relieve it of responsibilities it otherwise has as an employer offering retirement benefits to its employees.

Most employers with drug-and-alcohol-testing policies require employees suffering a workplace injury to be tested for drugs or alcohol. It is common for these post-injury tests to be conducted at the same time the employee receives medical attention for the injury. These types of testing requirements make sense and are generally a sound practice. The key for employers is ensuring these policies are implemented in an effective yet responsible manner.

From the category of its-too-crazy-to-be-made-up, a lawsuit on this topic was recently filed in Dallas. In that case, an employee suffered a workplace injury after falling from an undisclosed height. The employer had a practice of drug testing employees injured on the job and allegedly required a drug test. The minor problem in this case -- the employer is alleged to have left the unconscious worker lying on the floor for two hours waiting on the drug test to be administered. The employer then called 911, and the employee was taken by the paramedics to a hospital, where the employee later died. The plaintiffs allege the long delay in receiving treatment led to the employee's death. Click here for the story.

Keep in mind now that, as with any lawsuit, the initial claims made by the plaintiff are not always accurate, and in this case I hope that is exactly the situation. For those of you that require a drug test following a workplace injury, make sure you always look first to the employee's health and safety before focusing on the testing procedure.

Sometime in the next two weeks or so, we expect to see the much-anticipated ruling from the Supreme Court on the constitutionality of PPACA. What that ruling will look like remains anybody's guess. But from the issues that were argued at the Court, we can identify some possible outcomes and begin to consider what that might mean for employers.

The Issues

At its core, the litigation over health care reform involves the constitutionality of one small piece of the law: the individual mandate. The question is whether Congress has the power to require Americans to obtain health insurance or pay a penalty.

The case also touches on two related points that are relevant in considering possible outcomes. (1) Does an arcane tax statute called the Anti-Injunction Act prohibit the Court from even considering the case before the individual mandate goes into effect in 2014? (2) If the individual mandate is unconstitutional, can it be "severed" from the rest of the legislation and tossed aside by itself, or does the whole law fail?

The Possible Outcomes

Given these issues, there are at least four possible outcomes for the case.

Wait and See. The Court could decide the Anti-Injunction Act applies, thereby precluding a decision at least until 2014. (Most people following the case think this outcome is unlikely, but it remains a possibility.)
Full Speed Ahead. The Court could decide the individual mandate is valid, leaving the law fully intact.
Partial Invalidity. The Court could decide the individual mandate is unconstitutional but severable, leaving at least Continue Reading...

The U.S. House of Representatives approved a bill late last week that would partially repeal the use-it-or-lose-it rule for flexible spending account plans. The change would allow for a taxable distribution of up to $500 in unspent employee contributions remaining at the end of the plan year. Legislative attention to this somewhat obscure provision of the cafeteria-plan rules comes just days after the IRS separately announced it was evaluating whether the limitation should continue.

The bill would also repeal the PPACA restriction on reimbursement of over-the-counter drugs through health FSAs and HSAs.

The Senate has yet to vote, but there appears to be some bipartisan support for the bill, primarily among senators -- including Democrat Al Franken of Minnesota -- who favor a separate provision that would repeal a tax on medical-device manufacturers.

Imagine you hire a company to perform a service or conduct a function of your business you have chosen to outsource. As a result, the contractor company sends its employees to your facility to perform those tasks. Now imagine an employee of the contractor engaging in union organizing activities while on your property. Can you have the contractor company remove its employee from your property?

It's a simple question; however, the answer isn't so simple. The safe assumption to start with is that you cannot ask the company you contracted with to remove one of its employees when the employee engages in protected activity. In a recent decision, the National Labor Relations Board (NLRB) required a company to reverse its demand to a contractor company to remove an employee engaging in union-organizing activity on its property. In addition to being required to allow the contractor-company employee on its property, the employer was also required to make payment to the contractor employee for any losses suffered by the requirement to remove the contractor employee from the employer's property.

This general theme should cause employers to pause and consider carefully the identity of their contractors and the number of non-employees granted access to their facilities. While this recent case makes it clear that an instruction to a contractor to remove contractor employee(s) engaging in protected activity is unlawful, there may very well be circumstances that would allow for the removal of the contractor employee(s). Should a similar situation arise at your workplace, it is advisable to think carefully before requiring a contractor to Continue Reading...

The U.S. Department of Labor (DOL) has released a set of FAQs on the obligations of group health plans with respect to mental health and substance abuse benefits. The FAQs specifically discuss changes made by the Mental Health Parity and Addiction Equity Act of 2008.

The FAQs serve as a good reminder about these rules. Among other things, group health plans are prohibited from imposing visit limits on mental health and substance abuse benefits that are more restrictive than visit limits on medical/surgical benefits. Plans also may not use a separate deductible for mental health and substance abuse benefits and may not operate in a way that treats mental health and substance abuse benefits less favorably than other benefits.

In a recent decision, the Court of Appeals for the D.C. Circuit provided some clarity with respect to the statute of limitations contained within the Occupational Safety and Health Act. Most of us believe that when a statute states any claim, or in this case any citation, must be made within six months of the event, what it really means is there is a six-month cutoff. OSHA took a little different approach by issuing a series of citations to an employer for failing to keep adequate records over a several-year period. When the employer pointed out the six-month statute of limitations, OSHA's response was that the violation remained ongoing due to the employer's failure to make the record. After multiple levels of proceedings where OSHA's continuing-violation theory was accepted as valid, the case arrived at the D.C. Circuit Court of Appeals where it was promptly rejected by the Court. For now, six months really does mean six months again.

A federal appeals court in Boston ruled late last week that a portion of the Defense of Marriage Act (DOMA) is unconstitutional because it violates the rights of same-sex couples who are validly married under Massachusetts law. At issue in the case was a provision of DOMA that says only opposite-sex spouses may be recognized as spouses for purposes of federal law.

This has important implications for employee-benefit plans because several provisions of federal law grant spouses special rights. For example, spouses have survivor rights under retirement plans, and spouses can receive tax-free coverage and have special-enrollment and COBRA rights under group health plans. Under DOMA, these rights do not apply to same-sex spouses, but that could change if DOMA is struck down.

The case does not disturb existing state statutes and constitutional provisions that prohibit the recognition of same-sex marriages. But difficult questions may arise if a same-sex couple that is validly married in one state seeks to enforce rights under federal law against an employer or employee-benefit plan in a state that does not recognize same-sex marriage.

Ultimately, this is an issue that will be addressed by the Supreme Court, and now that a federal appeals court has ruled, review by the Supreme Court could come as early as next year.

In a recent advisory opinion, the U.S. Department of Labor (DOL) clarified the scope of its regulation on non-ERISA 403(b) plans. Under that regulation, certain 403(b) plans sponsored by 501(c)(3) organizations are considered exempt from ERISA. Among other things, the plans must be voluntary, must only allow for employee contributions (no employer contributions), and must limit other employer involvement.

The new advisory opinion describes an employer that maintains two plans: a 403(b) plan that allows for only employee salary-reduction contributions and a separate 401(a) qualified retirement plan through which employees receive matching contributions based on their contributions to the 403(b) plan. The DOL noted that simply maintaining two plans did not preclude the 403(b) plan from qualifying for the non-ERISA safe harbor. But in this case the close relationship between the two plans caused the 403(b) plan to fail the safe harbor. Specifically, the coordinated matching contribution provided through the 401(a) plan was too much employer involvement and caused the 403(b) plan not to be strictly "voluntary".