The Impact of The Healthcare Reform On Employers

March 28, 2010

Let me start this off by making it very clear that the jury is still out on this issue. I am not even sure if the politicians who voted for this are completely sure of the all of the different aspects of this new law.  The following information was gathered from several different sources. I am providing it to you with the understanding that I am not an authority on this but I am trying to at least get you some generalized information.

As I understand it, beginning in 2014, the new law will require an employer with more than 50 full-time employees  to pay $2,000 per employee if the employer fails to offer health coverage and has at least one full-time employee receiving a premium assistance tax credit or cost-sharing reduction. The first 30 employees of the employer will be excluded from the calculation of the  penalty. If the employer has 80 employees the fine imposed would be $100,000.

With respect to a more well known feature of the law, beginning in six months, health plans that provide dependent coverage will be required to provide it up to the age of 26 (just when we thought we had gotten ride of these child dependents!). It also includes coverage for pre-existing conditions. Starting in 2014, this provision will apply to all people. The legislation will also require that employers with more than 200 employees automatically enroll full-time employees in healthcare coverage. The provisions will allow employees to opt-out of the coverage after the automatic enrollment period.

For small businesses that choose to offer healthcare coverage to employees, the guidelines of the new law will offer tax credits (up to 35% of the premium) beginning in 2010. The full credit will be available to companies with 10 or fewer employees with average wages of $25,000. The larger employers will see the smaller credits. There are also some areas of the law that ban certain past practices. Effective six months from now the law prohibits insures from imposing lifetime limits on benefits, and there will be no more discrimination in favor of higher paid wage employees. Federal law will now require employers to provide unpaid breaks for new mothers to express breast milk. California had already passed this law several years ago (Lactation Accommodation).

There are other provisons that are not slated to begin until 2014 and later. I wanted to at least get you some of the new guidelines that will have a more immediate impact as well as some of the more controversial points. Good luck to us all on this one.

Employer Tax Credit Incentive For Hiring The Unemployed

March 22, 2010

On Thursday March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment (“HIRE”) Bill, passed by the Senate the day before.  Among other provisions, HIRE rewards employers who offer employment to the relatively long-term unemployed. Employers can take an exemption from Social Security payroll taxes for every worker hired after February 3, 2010, and before January 1, 2011, who has been unemployed for at least 60 days. The maximum value of the credit would be equal to 6.2% of wages up to $106,800, the FICA wage cap.

HIRE also provides an additional $1,000 income tax credit to businesses for every new employee retained for 52 weeks, to be taken on the employer’s 2011 income tax return.

California Supreme Court Resolves Employees Taking Off to Care For Ill Family Members

March 22, 2010

As a reminder the KinCAre law permits employees to use some of their accrued paid sick leave to care for ill family members. Sick leave that is used by an employee under this law cannot be counted against the employee under an employer’s absenteeism policy. Now, a recent decision by the California Supreme Court has clarified when the KinCare law applies and when it doesn’t.

The case in question invloved two employees who, according to company policy, were entitled to receive pay for any days off due to their own illnesses or injuries, not to exceed five days in a seven-day period. Employees did not accrue paid sick leave in a bank, and there was no set cap as to the amount of sick leave that an employee could take. Employees were not permitted to use sick leave to care for an ill family member. At the same time, and despite being paid for sick days, employees were subject to progressive discipline for excessive absences, including absences due to illness or injury. The Supreme Court ruled that the KinCare law applies to sick leave plans only if the employee actually accrues a set amount of sick leave in a given period of time. When paid sick leave is offered on an as-needed basis, the employer is not required to allow employees to use that leave to care for family members, and accumulated employee absences can be charged against employees under an absenteeism policy.

The decision is favorable for employers. If the employer has a sick leave policy that has a cap (example: the employee gets 5 sick days per year), once the cap has been exceeded then progressive discipline is appropriate. You have to be cautious if you have a policy that lets employees accrue sick time for every month worked, because the employee could be protected under the KinCare law for time taken off to care for ill family members.

Interracial Relationships And The Impact On The Work Environment

March 18, 2010

We live and work in a very diverse state and country. If we have learned nothing else over the past decades, it has become painstakingly obvious that the work environment has to be free of any form of discrimination. Interracial dating has broadened the spectrum because employees are not necessarily aware of  the ethnic background of a co-workers spouse, girlfriend, boyfriend, or significant other, and they make some inappropriate remark, or joke, because they have a comfort level with the person to whom they are speaking with. Let me give you a couple of examples. I was asked to investigate an allegation of harassment by an employee against his manager. The facts were simple enough. In early 2009, after President Obama was sworn in, the manager approached his subordinate, took out his cellphone, and asked him to listen to a tune. The song that he played was the theme song from the hit TV series; “The Jeffersons.” As the tune was playing, the manager commented that with Obama in the White House, that song was destined to be the new National Anthym.  The subordinate was offended because he was married to an African-American.

Another example, two employees speaking in a language they “thought” the other person did not understand and were making inappropriate racial comments about the third party. As it turned out, that third party was married to a person of the same ethnic background as the two who were making the derogatory remarks and had learned the language over the years.

There are other cases. Interracial dating by co-workers and other employees making inappropriate comments has also “stirred the pot.” When we think f nonfraternization policies we normally think of it in relationship to potential sexual hassment claims. As many of you probably know, I am not an advocate of nonfraternization policies. Lust, will always find a way! You cannot stop employees from dating each other but you can be an advocate of a creating a work environment free of any form of harassment.

Employees On Workers Compensation-The Do’s and Don’ts

March 15, 2010

Probably one of the toughest calls that we receive is from a frustrated client/manager who has an employee either out on worker’s comp for a longer period of time that the employer would like, or one that is back, and is on a modified duty restriction with either the same rate of pay or is not cooperating with the restriction.

Look, we feel your pain but frustrations lead to bad decisions that ultimately could cost you! When an employee has filed a claim for Workers Comp that automatically places them in a protected group and any adverse action against them could later be viewed as retaliation. But there are measures that you can take to protect yourself. They are not completely untouchable. Let’s look at some of the more common scenarios.

The employee that is out for longer than a year:

Employers become really frustrated with this one because they do not know how long they can keep this individual “on the books.” There have been cases where employers have finally terminated an employee that had been out longer than a year and had successfully defended a claim of retaliation. Our advice is to go ahead and fill the position but do not terminate the individual. The logic is simple. If the employee is not costing you anything to be out, why take any action that possibly could subject you to liability. When they eventually return (and the longer they are out before they return is the better for you) simply inform them that you were not able to hold their job. Another important factor is that you have also treated other employees who had been out on other non-work related disabilities the same. Meaning of course that they had surpassed all state and federal leave time requirements and did not return on a timely basis. You have to be consistent.

The employee on modified duty:

There are several issues here. The first is whether or not you have to put them on modified duty. The short answer is “no” if you do not have modified duty available. You should try, however, if the person is really not qualified for anything else then you do not have to create a position or opportunity. Your comp carrier will probably always try to have you put the individual on modified duty.

The second issue is whether you have to pay the same compensation if they are placed on modified duty. The short answer is “no”, but you should not reduce them by more than 10%. Yeah, I know, “big deal” but it is better than nothing.

The final sticky point is what happens when the employee is not  complying with the restrictons. They can be written up like any other employee who is not in compliance with policy. Should you terminate them? Probably not without several written warnings but before making a drastic move like termination, I would suggest after a sufficient amount of warnings, you inform them that you can no longer provide the modified duty which was initially designed to assist them with their recuperation. If they are not going to cooperate then they have to be placed off work so they they can properly recover.

The final point is for you not to get frustrated if the employee continues to miss work due to calling in sick. They have to follow the rules just like everyone else and can be written up as long as you have been consistent with others who have violated the same policy.

Remember: Do not ever terminate an employee under the above circumstances without first calling us or for non-clients, your consultant or attorney who advises you on such matters. Mistakes here can be very costly.

COBRA Subsidy Update

March 8, 2010

As you are aware, the American Recovery & Reinvestment Act of 2009, provides for a 65 percent COBRA premium subsidy for a period of up to 15 months for eligible employees who were INVOLUNTARILY terminated from employment during the period from September 1, 2008, through February 28, 2010, and their eligible family members.

On March 2, President Obama signed the Temporary Extension Act of 2010 (TEA), which extends the COBRA subsidy eligibility period, expands the group individuals who may receive the subsidy, and makes other changes and clairfications to the premium subsidy provisions originally included in the American Recovery & Reinvestment Act (ARRA).  The TEA amends ARRA to extend the eligibility period for one additional month (through March 31, 2010) however it is being reported that this is a temporary fix with the intent to have it extended through 2010. Employers and administrators should watch for additional legislation and should identify any qualified beneficiaries who were previously notified of COBRA rights due to involuntary termination of employment occurring after February 28, 2010. If these individuals were previously notified of their COBRA rights and were informed that the subsidy was not available to them, they should be contacted immediately and informed of the change.

It should also be noted, that the TEA expands the group of individuals who may be eligible for the subsidy by including employees who experienced a COBRA qualifying event of reduction of hours of employment occurring some time after September 1, 2008, followed by an involutary termination occurring on or after the date of the TEA (after March 2, 2010). However, please note that a COBRA subsidy for these individuals only applies to periods of coverage beginning after March 2, 2010, and the maximum period of COBRA coverage for these individuals still will be counted from the date of the earlier reduction in hours of employment. For example, assume that of the affected individuals elected COBRA at the time of his or her reduction in hours and is still receiving COBRA coverage at the time of involutary termination from employment (occurring between March 2, and March 31,). This person  may now claim the subsidy for periods of coverage beginning after March 2, 2010. If the individual did not make a COBRA election at the time of the loss of coverage due to reduced hours of employment, he or she will have additional COBRA election rights under the act to get back on coverage and start claiming a subsidy beginning with the period of coverage that starts March 2, 2010 (but remember the maximum period of coverage will be measured from the earlier reduction in hours of employment).

Whew!! I tried to make this as simple as possible. This information was gathered from the Proskauer news alert and has more detailed information if you need it (

Unemployment Taxes- A Special Announcement

March 4, 2010

We received a special bulletin that the National Association of State Workforce Agencies has reported that at least 35 states will pay higher unemployment taxes in 2010. The report showed the median increase will be 27.5% for most employers, while businesses in Florida and Hawaii could see increases 10 times more than their current tax. State trust funds have been deleted, causing 26 states to borrow more than $30 billion from the federal government with numbers expecting to grow to 40 states and $90 billion by 2010.

It is imperative that employers do all that they can to prevent unwarranted claims. Please encourage (and demand) the managers to document violations of company policies which will help us in fighting unwarranted claims on your behalf. In addition, please respond to our request for additional information on a timely basis. Every claim effectively protested will make a difference.

Employer Criminally Prosecuted For Under-reporting Wages & Immigration Violations

March 1, 2010

The owner of a restaurant has been indicted by the U.S. Attorneys’ office for under-reporting wages ( employment taxes), the failure to pay overtime, and for immigration violations. I have continually stressed that the various state and federal agencies are beating the bushes and are working in a cooperative effort to seek out employers that are violating the law. In this particular case, the IRS went after the employer because he tried to avoid paying increased payroll taxes which could land him in federal prison for twenty years along with a fine of $250,000 for each criminal count.

In addition, the employees in this particular case were not American citizens, and the employer failed to have the required work-related documentation on file (I-9’s) as required by Homeland Security. I know this may sound like the same old song but the reality is we stumble across clients every week that are not in compliance. Please get the updated form and use it for new hires. Another issue that keeps coming up, are calls that employers are receiving from non-employees who are upset that an employee of the company is reportedly using their social security number. When the employer questions the employee, the employee admits that they are in fact working either under an assumed name and/or are using another person’s social security number. If they admit this, they have falsified company documentation and can be subject to immediate termination. The push back we get sometimes is that that particular worker is “the best worker that we have.” Well, you decide what you want to do but if you get caught you will pay the price.

Finally, the employer mentioned earlier also got nailed because he failed to pay overtime. Here we go again. Wage and hour issues but this time the feds, under the Fair Labor Standards Act, jumped into the deep end of the pool. Furthermore, this guy not only failed to pay overtime but he also paid a part of the wages in CASH. When we pay in case what are we failing to do? Yep, pay taxes, and the government wants their piece of the pie.

PLEASE, once again, make sure that you are in compliance in all of the areas noted above. Now we are talking about FEDERAL PRISON (and by the way, federal prison time is done at 100% AND NOT 50%  like state or county time).