Arkansas Judge Finds Arkansas Same-Sex Marriage Bans Unconstitutional; State Asks For Stay Pending Appeal

May 12, 2014

The State of Arkansas is appealing a May 9, 2014 decision of Circuit Court Judge Christopher Charles Piazza that if not overturned, makes Arkansas the latest state forced to recognize same-sex marriage.  Like the growing list of other jurisdictions that recently have recognized same-sex couples as entitled to legally protections of marriage or enacted domestic partnership laws, employers and employee benefit plan administrators should take note of the decision for purposes of administering their employment and employee benefit plan responsibilities with respect to same-sex couples in Arkansas.

In his May 9, 2014 order in Wright v. State of Arkansas, Judge Piazza ruled that the ban by Arkansas of same-sex marriages and its refusal to recognize same-sex marriages performed in other states violate the due process clause.   The Wright plaintiffs included 12 same-sex couples seeking to marry in Arkansas and 8 same sex couples seeking to have Arkansas recognize their marriages despite two Arkansas laws expressly prohibiting recognition of same-sex marriages:

  • Act 144 of 1997 of the Arkansas General Assembly, codified at Ark. Code Ann. Section 9-11-107 and 9-11-109, which states “marriage shall only ben between a man and a woman.  A marriage between persons of the same-sex is void” and that a marriage which would be valid by the laws of the state  entered into by a persons of the same-sex is void in Arkansas; and
  • Amendment 83 passed by Arkansas voters in 1994, which provides “marriage consists of only the union of one man and one woman” and that “Legal status for unmarried persons which is identical or substantially similar to marital status shall not be valid or recognized in Arkansas, except that the legislature may recognize a common law marriage from another state between a man and a woman.”

Citing among other things to the Supreme Court’s recent decision striking down the Defense of Marriage Act  (DOMA) in United States v. Windsor, 570 U.S. __, 133 S.Ct. 2675 (2013), Judge Piazza ruled both laws violated the equal protection clause of the United States Constitution and therefore were void.

The State of Arkansas filed an immediate appeal to the ruling and has asked for a stay pending appeal.

In Windsor, the Supreme Court ruled unconstitutional  the prohibition enacted by Congress, which prohibited the federal government from recognizing marriages or domestic partnerships between same-sex couples that were valid under state law for purposes of federal tax laws. Since then, the Internal Revenue Service and other federal agencies generally have moved quickly to treat same-sex couples entering into valid marriages or domestic partnerships under state law.  As a result of the Internal Revenue Service’s implementation of changes required by this decision, many employee benefit plans and their sponsoring employers now face the need to review and update the tax treatment and other plan terms and policies regarding the treatment of same-sex partnerships.  Meanwhile, many employers also need to update family medical leave and other employment policies to respond to Labor Department regulatory and enforcement changes, which call for employers to recognize certain domestic partnerships or same-sex marriages that are valid in the state performed as marriages for purposes of leave and other laws.

 About the Author

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer has more than 23 years experience working with employers, professional employment organizations, employee benefit plan sponsors and administrators and others on a wide range of labor and employment, employee benefits, and other management matters.  The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, the editor of Solutions Law Press HR & Benefits Update and, Ms. Stamer also is recognized for her publications, industry leadership, workshops and presentations on these and other health industry and human resources concerns. She regularly speaks and conducts training for the ABA, Institute of Internal Auditors, Society for Professional Benefits Administrators, Southwest Benefits Association and many other organizations.  Publishers of her many highly regarded writings on health industry and human resources matters include the Bureau of National Affairs, Aspen Publishers, ABA, AHLA, Aspen Publishers, Schneider Publications, Spencer Publications, World At Work, SHRM, HCCA, State Bar of Texas, Business Insurance, James Publishing and many others.  You can review other highlights of Ms. Stamer’s experience here.

If you need help with human resources or other management, concerns, wish to ask about compliance, risk management or training, or need legal representation on other matters please contact Cynthia Marcotte Stamer here or (469)767-8872.

Other Resources

If you found this information of interest, you also may be interested in reviewing other recent Solutions Law Press updates including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information here or registering to receive our Solutions Law Press distributions here. For important information about this communication click here.

©2014 Cynthia Marcotte Stamer. All rights reserved.


Businesses Employing Children Should Review & Tighten Practices In Light of Tightened Rules & Increased Penalties

May 6, 2014

Employers gearing up to hire college, high school and other younger workers for summer positions should confirm their compliance and other preparations are ready to cope with these younger workers.

Working effectively with young workers can provide great benefits to the employer, invaluable experience to the young worker, and tremendous community benefits.  However, working with young workers often creates additional legal requirements, as well as requires special planning to effectively manage workers inexperienced with coping with the workplace environment.

Federal Regulation of Employment of Children

With summer the time that youth employment traditionally peaks, employers hiring workers under age 18 should review their practices for compliance with federal and state child labor laws to minimize exposures to violations under special rules governing their employment of children under the Fair Labor Standards Act (FLSA), the Occupational Health & Safety Act (OSHA)  and other federal and state laws.  Many of these regulations have not only increased requirements in recent years, but also allow for stiff penalties against employers that violate rules governing the employment of children.  Under amendments to the FLSA enacted a few years ago, for instance, employers violating child labor laws now face tighter rules and increased penalties under these rules. Under Labor Department FLSA regulations for nonagricultural workers, for instance,  the employment of individuals under age 18 in hazardous nonagricultural occupations is prohibited. Individuals under age 16 may work only limited hours outside of school hours. Additionally, 14- and 15-year-olds may not work before 7 a.m. or later than 7 p.m. (9 p.m. from June 1 through Labor Day).  There are additional restrictions on the types of jobs and hours 14- and 15-year-olds may work.  Special rules also apply to the employment of children in agriculture.

Under tough new penalties announced by the U.S. Department of Labor on July 16, 2010, employers who illegally employ individuals ages 12 or 13 will face a penalty of at least $6,000 per violation. If a worker is under 12 years of age and illegally employed, the penalty will be at least $8,000. Penalties for illegally employing workers under age 14 could be raised to $11,000 under certain conditions.

Planning For Effective Management Of Young Workers

Employers hiring young workers also should consider the advisability of special planning or supervision to help make the engagement successful for both the employer and the young worker.  Young workers lack of experience with the expectations of the workplace or other immaturity may require special coaching or management.  Lack of experience with the position may require additional training.  Failing to address these needs can create performance issues or even safety issues if not properly handled.

The Department of Labor and various agencies have a wide range of resources to aid employers and communities in planning for youth employment.  It recently released a new program planning guide available at http://wdr.doleta.gov/directives/attach/TEN/TEN_28_13_Attachment.pdf.

As summer traditionally is a time when youth employment peaks, summer employment practices of employers that hire young workers makes it particularly important that employers of these young workers take steps to review their current practices to confirm their compliance with these new rules to minimize penalty exposures. If you need assistance with reviewing your organization’s child labor or other employment or employee benefit practices, please contact the author of this update, Board Certified Labor & Employment attorney Cynthia Marcotte Stamer at (469) 767-8872 or cstamer@solutionslawyer.net.

About the Author

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer has more than 23 years experience working with employers, professional employment organizations, employee benefit plan sponsors and administrators and others on a wide range of labor and employment, employee benefits, and other management matters.  The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, the editor of Solutions Law Press HR & Benefits Update and, Ms. Stamer also is recognized for her publications, industry leadership, workshops and presentations on these and other health industry and human resources concerns. She regularly speaks and conducts training for the ABA, Institute of Internal Auditors, Society for Professional Benefits Administrators, Southwest Benefits Association and many other organizations.  Publishers of her many highly regarded writings on health industry and human resources matters include the Bureau of National Affairs, Aspen Publishers, ABA, AHLA, Aspen Publishers, Schneider Publications, Spencer Publications, World At Work, SHRM, HCCA, State Bar of Texas, Business Insurance, James Publishing and many others.  You can review other highlights of Ms. Stamer’s experience here.

If you need help with human resources or other management, concerns, wish to ask about compliance, risk management or training, or need legal representation on other matters please contact Cynthia Marcotte Stamer here or (469)767-8872.

Other Resources

If you found this information of interest, you also may be interested in reviewing other recent Solutions Law Press updates including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information here or registering to receive our Solutions Law Press distributions here. For important information about this communication click here.

©2014 Cynthia Marcotte Stamer. All rights reserved.


Employer Faces $2M FLSA Lawsuit For Alleged Worker Misclassification

December 26, 2013

Health Care Reform Adds Fuel To Enforcement Fire

Employers must ensure they can defend their treatment of workers as as independent contractors or otherwise exempt from wage and hour and overtime requirements and take other steps to manage wage and hour risks that can arise under the Fair Labor Standards Act (FLSA) and other laws to when caught misclassifying workers.  That’s the clear message the U.S. Department of Labor (Labor Department) is sending to employers by filing lawsuits against employers like the one it recently announced against Wang’s Partner Inc., doing business as Hibachi Grill and Supreme Buffet in Jonesboro, and its owner, Shu Wang, to recover $1,997,726 in back wages and liquidated damages for 84 employees.

The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. The requirements generally apply to any workers that the employer who receives its services cannot prove is not its common law employee or an exempt employee within the meaning of the FLSA.  In general, “hours worked” includes all time an employee must be on duty, or on the employer’s premises or at any other prescribed place of work, from the beginning of the first principal work activity to the end of the last principal activity of the workday. Additionally, the law requires that accurate records of employees’ wages, hours and other conditions of employment be maintained. These requirements generally apply for all workers who the facts and circumstances reflect are common law employees and otherwise do not qualify as exempt employees under the FLSA.  Violations of these requirements can result significant backpay and other damage awards to private plaintiffs, backpay and penalties assessments or settlements from Labor Department suits, and, if the violation is found willful, criminal liability.

Wang’s Partner Inc. Suit

The lawsuit against Want’s Partner Inc. shows employers the importance of avoiding improperly classifying workers as independent contractors for purposes of the FLSA. Employers that inappropriately classify workers as independent contractors often fail to maintain appropriate time and other records, pay minimum wage and overtime and violate other FLSA requirements.  In general, a business receiving services of a worker generally bears the burden of providing that the worker is not its common law employee under the applicable facts and circumstances test applicable under the FLSA.

As in many other enforcement areas, the Labor Department Wage and Hour Division in recent years has stepped up its scrutiny of employer relationships with workers treated as independent contractors.  The Labor Department and many other agencies increasingly view the misclassification of workers as something other than employees, such as independent contractors, as a serious problem for affected employees, employers and to the entire economy.  According to the Labor Department, misclassified employees are often denied access to critical benefits and protections, such as family and medical leave, overtime, minimum wage and unemployment insurance and other rights.  The Labor Department also says employee misclassification also generates substantial losses to state and federal treasuries, and to the Social Security and Medicare funds, as well as to state unemployment insurance and workers compensation funds. To address these and other concerns, the Labor Department has joined other agencies like the Internal Revenue Service increasingly is challenging employers’ treatment of workers as exempt from FLSA and other legal obligations as independent contractors or otherwise.

The lawsuit in the Northern District of Georgia against Wang’s Partner, Inc. illustrates this trend.  One of the growing number of lawsuits and other enforcement actions resulting from this trend, the suit shows the significant exposures that an employer risks by misclassifying workers as independent contractors or otherwise exempt from the FLSA. The Labor Department says an investigation revealed that Wang’s Partner Inc. misclassified workers as independent contractors and engaged in numerous violations of the FLSA.  The Labor Department seeks $1,997,726 in back wages and liquidated damages for 84 employees.

The Labor Department says investigators from the division’s Atlanta district office found that the employer misclassified servers as independent contractors, failed to pay servers and kitchen staff at least the federal minimum wage of $7.25 per hour and failed to pay overtime compensation at time and one-half employees’ regular rates for hours worked beyond 40 in a work week. Additionally, the employer did not maintain accurate records of hours worked and wages paid.

In announcing the Wang’s Partner Inc. lawsuit, the Labor Department warned employers against similar misclassification of workers.  “The U.S. Department of Labor is committed to ensuring that all workers receive the wages to which they are legally entitled,” said Secretary of Labor Thomas E. Perez. “We will not stand by while employers use business models that hurt workers, their families and law-abiding employers. This lawsuit illustrates that the department will use every enforcement tool necessary to resolve cases where employees are unlawfully treated as independent contractors, and vulnerable workers are not paid the minimum wage.”

 FLSA Violations Generally Costly;  Enforcement Rising

The Labor Department’s prosecutions against employers arising from misclassification of workers document the Labor Department is acting in accordance with this warning.  In recent years, misclassification of workers increasingly has become an element in its FLSA and other enforcement actions.  According to the Labor Department, misclassified employees are often denied access to critical benefits and protections, such as family and medical leave, overtime, minimum wage and unemployment insurance and other rights.  The Labor Department also says employee misclassification also generates substantial losses to state and federal treasuries, and to the Social Security and Medicare funds, as well as to state unemployment insurance and workers compensation funds. To address these and other concerns, the Labor Department has joined other agencies like the Internal Revenue Service increasingly is challenging employers’ treatment of workers as exempt from FLSA and other legal obligations as independent contractors or otherwise.Whether due to mischaracterization of workers as independent contractors or as common law employees that qualify as exempt under the FLSA rules, the Labor Department increasingly is acting on its promise to go after employers that violate the FLSA based on worker misclassifications.

In 2012, for instance, First Republic Bank paid $1,009,643.93 in overtime back wages for 392 First Republic Bank employees in California, Connecticut, Massachusetts, New York and Oregon after the Labor Department found the San Francisco-based bank wrongly classified the employees as exempt from the FLSA’s overtime and recordkeeping requirements, resulting in violations of the Fair Labor Standards Act’s overtime and record-keeping provisions.  The Labor Department announced the settlement resulting in the payment on November 27, 2012.

The settlement came after an investigation by the Labor Department’s Wage and Hour Division found that the San Francisco-based bank wrongly classified the employees as exempt from overtime, resulting in violations of the FLSA’s overtime and record-keeping provisions.

In announcing the settlement with First Republic Bank, the Labor Department warned employers to confirm the appropriateness of their classification of workers.  “It is essential that employers take the time to carefully assess the FLSA classification of their workforce,” said Secretary of Labor Hilda L. Solis in the Labor Department’s announcement of the settlement. “As this investigation demonstrates, improper classification results in improper wages and causes workers real economic harm.”

The Wang’s Partner Inc and First Republic Bank enforcement actions are not unique.  The Labor Department and private plaintiffs alike regularly target employers that use aggressive worker classification or other pay practices to avoid paying minimum wage or overtime to workers.  Under the Obama Administration, DOL officials have made it a priority to enforce overtime, record keeping, worker classification and other wage and hour law requirements.  See e.g.,  Boston Furs Sued For $1M For Violations Of Fair Labor Standards Act; Record $2.3 Million+ Backpay Order; Minimum Wage, Overtime Risks Highlighted By Labor Department Strike Force Targeting Residential Care & Group Homes; Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; 250 New Investigators, Renewed DOL Enforcement Emphasis Signal Rising Wage & Hour Risks For EmployersQuest Diagnostics, Inc. To Pay $688,000 In Overtime Backpay

In an effort to further promote compliance and enforcement of these rules,  the Labor Department is using  smart phone applications, social media and a host of other new tools to educate and recruit workers in its effort to find and prosecute violators. See, e.g. New Employee Smart Phone App New Tool In Labor Department’s Aggressive Wage & Hour Law Enforcement Campaign Against Restaurant & Other Employers.    As a result of these effort, employers violating the FLSA now face heightened risk of enforcement from both the  Labor Department and private litigation.

Health Care Reform Adds Risks, Fuels More Enforcement

The rollout of new health benefit mandates as part of the sweeping reforms enacted under the Patient Protection and Affordable Care Act (ACA) is further expanding the liability of misclassification and the risk of enforcement against employers.

Among other things, the employer mandates of ACA, now delayed until 2015, generally will require employers of 50 or more full-time employees either to provide health coverage meeting the requirements of ACA or pay the “employer penalty” established under Internal Revenue Code Section 4980H.  While the rule now is delayed until 2015, the employment data for 2014 will be used to determine what employees that an employer must take into account for purposes of this rule.  ACA generally relies on the common law employment tests used under the FLSA to make this determination.  It also requires employers provide other rights to workers who are considered common law employees under these rules.

Employers Should Strengthen Practices For Defensibility

 To minimize exposure under the FLSA, employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take other actions to minimize their potential liability under applicable wages and hour laws.  Steps advisable as part of this process include, but are not necessarily limited to:

  • Audit of each position current classified as exempt to assess its continued sustainability and to develop documentation justifying that characterization;
  • Audit characterization of workers obtained from staffing, employee leasing, independent contractor and other arrangements and implement contractual and other oversight arrangements to minimize risks that these relationships could create if workers are recharacterized as employed by the employer receiving these services;
  • Review the characterization of on-call and other time demands placed on employees to confirm that all compensable time is properly identified, tracked, documented, compensated and reported;
  • Review of existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;
  • If the audit raises questions about the appropriateness of the classification of an employee as exempt, self-initiation of proper corrective action after consultation with qualified legal counsel;
  • Review of existing documentation and record keeping practices for hourly employees;
  • Exploration of available options and alternatives for calculating required wage payments to non-exempt employees; and
  • Re-engineering of work rules and other practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures.

Because of the potentially significant liability exposure, employers generally will want to consult with qualified legal counsel before starting their risk assessment and assess risks and claims within the scope of attorney-client privilege to help protect the ability to claim attorney-client privilege or other evidentiary protections to help shelter conversations or certain other sensitive risk activities from discovery under the rules of evidence.

For Help With Investigations, Policy Updates Or Other Needs

If you need help in conducting a risk assessment of or responding to an IRS, DOL, Justice Department, or other federal or state agencies or other private plaintiff or other legal challenges to your organization’s existing workforce classification or other labor and employment, compliance,  employee benefit or compensation practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469) 767-8872 .

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit  and management policies and practices. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer often has worked, extensively on these and other workforce and performance related matters.   She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For more information about Ms. Stamer and her experience or to get access to other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press, Inc.

Solutions Law Press, Inc.™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested in exploring other Solutions Law Press, Inc. ™ tools, products, training and other resources here and reading some of our other Solutions Law Press, Inc.™ human resources news here including the following:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here. For important information about this communication click here.

THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2012 Cynthia Marcotte Stamer, P.C.  Non-exclusive license to republish granted to Solutions Law Press, Inc.™  All other rights reserved.


Affordable Care Act Requires Proper Integration of HRAs, HFSAs, & Certain Other Health Premium Reimbursement Arrangements

September 24, 2013

Employers using health reimbursement arrangements (HRAs), health flexible spending plans (HFSAs) or other employer payment plan arrangements under which the employer provides a fixed defined contribution from the employer to employees to use to purchase individual or group health insurance should have those arrangements reviewed for compliance with the Patient Protection & Affordable Care Act (ACA) annual limit and preventive care rules as interpreted by the Departments of Labor, Treasury and Health & Human Service.

The Internal Revenue Service and the Employee Benefit Security Administration construe ACA as requiring that these arrangements be properly integrated with health insurance coverage that otherwise complies with the Affordable Care Act’s annual limit and preventive care rules to avoid violating ACA in recent guidance published in IRS Notice 2013-54 and EBSA Technical Release No. 2013-04.

Employers that use HRAs, HFSAs, or other employer defined contribution style arrangements to reimburse employees for individual or group insurance coverage should review their arrangements to ensure that they are properly designed to comply with ACA’s annual limit, preventive care and other mandates.

For Help or More Information

 If you need help understanding or dealing with these impending notification requirements, with other 2014 health plan decision-making or preparation, or with reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals. A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials about regulatory, investigatory or enforcement concerns.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, HR.com, Insurance Thought Leadership, Solutions Law Press, Inc. and other publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this of interest, you may also be interested in the following recent publications by Ms. Stamer published by Solutions Law Press, Inc.:

For important information about this communication see here. THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS. ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2013 Cynthia Marcotte Stamer. Non-exclusive license to republish granted to Solutions Law Press, Inc. All other rights reserved.


Review Benefit Plan, FLMA & Other Family-Related Policies In Light Of Labor Department Same-Sex Marriage Guidance

September 24, 2013

Employers and other employee benefit plan sponsors, benefit plan fiduciaries, and their advisors and service providers should review and update their health and employee benefit plan’s definitions of “spouse,” “marriage” and “dependent” in light of new guidance from the Department of Labor Wage & Hour Division (WHD) guidance under the Family & Medical Leave Act and the Employee Benefit Security Administration (EBSA) guidance under the under the Employee Retirement Income Security Act (ERISA) on the effect of the Supreme Court’s finding of the Defense of Marriage Act unconstitutional in United States v. Windsor on their family leave and employee benefit plan obligations to employees involved in same-sex domestic partnership relationships When doing so, employers and employee benefit plan sponsors, fiduciaries and administrators also should keep in mind that the Defense of Marriage Act ruling is only one of a number of recent developments fueling an evolution in the traditional concepts of marriage, dependent and family and their effect on employment and employee benefit policies and practices.  Accordingly, when reviewing these arrangements, employers and their benefit plans need to be reviewed and updated to keep abreast of and comply with these evolving practices and standards.

On June 26, 2013, the Windsor decision struck down the provisions of the Defense of Marriage Act that denied federal benefits to legally married, same-sex couples.

In Technical Release No. 2013-04 published on September 18, 2013, the EBSA states the Department plans to issue additional guidance in the coming months as it consults with the Department of Justice and other federal agencies to implement the  Winsor decision.  In the meanwhile, however, EBSA says that in general, the terms “spouse” and “marriage” in Title I of ERISA and in related department regulations should be read to include same-sex couples legally married in any state or foreign jurisdiction that recognizes such marriages, regardless of where they currently live.

The EBSA guidance follows the publication by the WHD of guidance on the effect of the Windsor decision on the family leave responsibilities of employers covered by the FMLA to employees involved in same-sex domestic partnership relationships in Fact Sheet #28F: Qualifying Reasons for Leave under the Family and Medical Leave Act published by the WHD earlier in August.  In that guidance, WHD updated its definition of “spouse” for purposes of the FMLA to mean “husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including “common law” marriage and same-sex marriage.”

The Windsor decision and these new pieces of related guidance reflect the evolving nature of marriage and family increasingly incorporated into federal and state employment and employee benefit law.  While the Labor Department promises that additional guidance on the Defense of Marriage Act will be forthcoming the future, the new guidance makes clear that employers should review their existing employment and employee benefit plans in light of the Windsor decision and evolving precedent.  Employers, employee benefit plans, their sponsors, fiduciaries and administrators should not assume that existing definitions will have the intended effect or be compliant.  Rather, they should assess the existing language in light of the decision and the evolving guidance and make appropriate adjustments as necessary to ensure that their plans properly document the desired treatment in accordance with the evolving guidance and precedent.  In doing so, employers also should review other definitions of dependent, kin, family and related concepts to ensure they are up to date with the FMLA, the Patient Protection & Affordable Care Act, the Defense of Marriage Act-related guidance and other current regulations.

For Help or More Information

 If you need help understanding or dealing with these impending notification requirements, with other 2014 health plan decision-making or preparation, or with reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals. A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials about regulatory, investigatory or enforcement concerns.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, HR.com, Insurance Thought Leadership, Solutions Law Press, Inc. and other publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this of interest, you may also be interested in the following recent publications by Ms. Stamer published by Solutions Law Press, Inc.:

For important information about this communication see here. THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS. ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2013 Cynthia Marcotte Stamer. Non-exclusive license to republish granted to Solutions Law Press, Inc. All other rights reserved.


New Final FLSA Rule Gives Home Workers Minimum Wage, Overtime, Other FLSA Protections

September 18, 2013

Health care and other parties employing or otherwise engaging the services of home care workers should review and update their policies and  practices for scheduling, tracking hours worked and paying these workers to ensure that they comply by January 1, 2015 with a new final rule announced by the U.S. Department of Labor’s Wage and Hour Division today (September 18, 2013). Today’s announcement of the regulatory changes means employers of home care workers can expect to see costs rise and also will join most other U.S. businesses that must worry about getting caught in minimum wage and overtime enforcement traps.

New Home Care Worker Rules Effective January 2015

Under the new final rule, the Labor Department extends the Fair Labor Standards Act’s minimum wage and overtime protections to most of the nation’s direct care workers who provide essential home care assistance to elderly people and people with illnesses, injuries, or disabilities beginning January 1, 2015.

The new final rule generally will require that the approximately two million home care workers such as home health aides, personal care aides, and certified nursing assistants will qualify for minimum wage and overtime.  Employers engaging these services also generally will need to keep records and comply with other FLSA requirements with respect to these workers as well.

In anticipation of the rollout of these new protections, the Labor Department is kicking off a public outreach campaign to educate home care workers and their employers about the rule change. The Department will be hosting five public webinars during the month of October and has created a new, dedicated web portal here with fact sheets, FAQs, interactive web tools, and other materials.

The Labor Department’s focus on home workers is an extension of its expanded regulation and enforcement efforts targeting a broad range of health care industry employers. Home care and other health industry employers should act to manage their rising exposures to minimum wage, overtime and other federal and state wage and hour law risks.

The impending change in the treatment of home care workers is part of a larger commitment by the Obama Administration to both expansion and enforcement of the FLSA’s minimum wage and overtime provisions, and a specific program targeting employers in health care and related services industries.

The Obama Administration since taking office has conducted an aggressive campaign seeking to significantly increase the minimum wage under the FLSA and expand other protections.  Along with this proactive regulatory agenda, the Obama Administration also specifically is aggressively targeting health care and other caregiver businesses in its enforcement and audit activities. See, e.g. Home health care company in Dallas agrees to pay 80 nurses more than $92,000 in back wages following US Labor Department investigation; US Department of Labor secures nearly $62,000 in back overtime wages for 21 health care employees in Pine Bluff, Ark.; US Department of Labor initiative targeted toward increasing FLSA compliance in New York’s health care industry; US Department of Labor initiative targeted toward residential health care industry in Connecticut and Rhode Island to increase FLSA compliance; Partners HealthCare Systems agrees to pay 700 employees more than $2.7 million in overtime back wages to resolve U.S. Labor Department lawsuit; US Labor Dnda epartment sues Kentucky home health care provider to obtain more than $512,000 in back wages and damages for 22 employees; and Buffalo, Minn.-based home health care provider agrees to pay more than $150,000 in back wages following US Labor Department investigation.

Violation of wage and hour laws exposes health care and other employers to significant back pay awards, substantial civil penalties and, if the violation is found to be willful, even potential criminal liability.   Because states all have their own wage and hour laws, employers may face liability under either or both laws.   Coupled with these and other enforcement efforts against health and other caregiver businesses, today’s announcement reflects enforcement risks will continue to rise for employers of home care workers.

In light of the proposed regulatory changes and demonstrated willingness of the Labor Department and private plaintiffs to bring actions against employers violating these rules, health care and others employing home care workers should take well-documented steps to manage their risks.  These employers should both confirm the adequacy of their practices under existing rules, as well as evaluate and begin preparing to respond to the proposed modifications to these rules.  In both cases, employers of home care or other health care workers are encouraged to critically evaluate their classification or workers, both with respect to their status as employees versus contractor or leased employees, as well as their characterization as exempt versus non-exempt for wage and hour law purposes.  In addition, given the nature of the scheduled frequently worked by home care givers, their employers also generally should pay particular attention to the adequacy of practices for recordkeeping.

Of course, the home care and health care industry are not the only industries that need to worry about FLSA enforcement.   The Obama Administration is very aggressive in its enforcement of wage and hour and overtime laws generally.  For instance, First Republic Bank recently paid $1,009,643.93 in overtime back wages for 392 First Republic Bank employees in California, Connecticut, Massachusetts, New York and Oregon after the Labor Department found the San Francisco-based bank wrongly classified the employees as exempt from the FLSA’s overtime and recordkeeping requirements, resulting in violations of the Fair Labor Standards Act’s overtime and record-keeping provisions.  The Labor Department announced the settlement resulting in the payment on November 27, 2012.  The  settlement resulted from an investigation by the Labor Department that found the San Francisco-based bank wrongly classified the employees as exempt from overtime, resulting in violations of the FLSA’s overtime and record-keeping provisions.

The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also are required to maintain accurate time and payroll records.

While the FLSA provides an exemption from both minimum wage and overtime pay requirements for individuals employed in bona fide executive, administrative, professional and outside sales positions, as well as certain computer employees, job titles do not determine the applicability of this or other FLSA exemptions. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the department’s regulations. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week.

Investigators found that First Republic Bank failed to consider the FLSA’s criteria that allow certain administrative and professional employees to be exempt from receiving overtime pay. In fact, the employees were entitled to overtime compensation at one and one-half times their regular rates for hours worked over 40 in a week. Additionally, the bank failed to include bonus payments in nonexempt employees’ regular rates of pay when computing overtime compensation, in violation of the act. Record-keeping violations resulted from the employer’s failure to record the number of hours worked by the misclassified employees.

“It is essential that employers take the time to carefully assess the FLSA classification of their workforce,” said Secretary of Labor Hilda L. Solis in the Labor Department’s announcement of the settlement. “As this investigation demonstrates, improper classification results in improper wages and causes workers real economic harm.”

 FLSA Violations Generally Costly;  Enforcement Rising

The enforcement record of the Labor Department confirms that employers that improperly treat workers as exempt from the FLSA’s overtime, minimum wage and recordkeeping requriements run a big risk.  The Labor Deprtment and private plaintiffs alike regularly target employers that use aggressive worker classification or other pay practices to avoid paying minimum wage or overtime to workers.  Under the Obama Administration, DOL officials have made it a priority to enforce overtime, record keeping, worker classification and other wage and hour law requirements.  See e.g.,  Boston Furs Sued For $1M For Violations Of Fair Labor Standards Act; Record $2.3 Million+ Backpay Order; Minimum Wage, Overtime Risks Highlighted By Labor Department Strike Force Targeting Residential Care & Group Homes; Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; 250 New Investigators, Renewed DOL Enforcement Emphasis Signal Rising Wage & Hour Risks For EmployersQuest Diagnostics, Inc. To Pay $688,000 In Overtime Backpay In an effort to further promote compliance and enforcement of these rules,  the Labor Department is using  smart phone applications, social media and a host of other new tools to educate and recruit workers in its effort to find and prosecute violators. See, e.g. New Employee Smart Phone App New Tool In Labor Department’s Aggressive Wage & Hour Law Enforcement Campaign Against Restaurant & Other Employers.    As a result of these effort, employers violating the FLSA now face heightened risk of enforcement from both the  Labor Department and private litigation.

Employers Should Strengthen Practices For Defensibility

 To minimize exposure under the FLSA, employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take other actions to minimize their potential liability under applicable wages and hour laws.  Steps advisable as part of this process include, but are not necessarily limited to:

  • Audit of each position current classified as exempt to assess its continued sustainability and to develop documentation justifying that characterization;
  • Audit characterization of workers obtained from staffing, employee leasing, independent contractor and other arrangements and implement contractual and other oversight arrangements to minimize risks that these relationships could create if workers are recharacterized as employed by the employer receiving these services;
  • Review the characterization of on-call and other time demands placed on employees to confirm that all compensable time is properly identified, tracked, documented, compensated and reported;
  • Review of existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;
  • If the audit raises questions about the appropriateness of the classification of an employee as exempt, self-initiation of proper corrective action after consultation with qualified legal counsel;
  • Review of existing documentation and record keeping practices for hourly employees;
  • Exploration of available options and alternatives for calculating required wage payments to non-exempt employees; and
  • Re-engineering of work rules and other practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures.

Because of the potentially significant liability exposure, employers generally will want to consult with qualified legal counsel before starting their risk assessment and assess risks and claims within the scope of attorney-client privilege to help protect the ability to claim attorney-client privilege or other evidentiary protections to help shelter conversations or certain other sensitive risk activities from discovery under the rules of evidence.

For Help With Investigations, Policy Updates Or Other Needs

If you need help in conducting a risk assessment of or responding to an IRS, DOL, Justice Department, or other federal or state agencies or other private plaintiff or other legal challenges to your organization’s existing workforce classification or other labor and employment, compliance,  employee benefit or compensation practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469) 767-8872 .

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit  and management policies and practices. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer often has worked, extensively on these and other workforce and performance related matters.   She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For more information about Ms. Stamer and her experience or to get access to other publications by Ms. Stamer see here or contact Ms. Stamer directly.

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THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2012 Cynthia Marcotte Stamer, P.C.  Non-exclusive license to republish granted to Solutions Law Press, Inc.™  All other rights reserved.


New DOL Guidance Makes Many Employers Rethink Giving FLSA 18B Exchange Notices

September 12, 2013

But Informal Agency Communications Suggest Don’t Be Too Quick To Assume No Consequences For Not Giving Notice

Employer and union group health plan sponsors and insurers of group and individual health plans who have struggled to complete and send the new employer notice (Exchange Notice) to employees required by Fair Labor Standards Act (FLSA) Section 18B by the October 1, 2013 deadline set by the U.S. Department of Labor Employee Benefit Security Administration (EBSA) should contact their legal counsel to discuss the advisability of sending the Exchange Notice in light of a new informal guidance posted and distributed by EBSA yesterday (September 11, 2013) here titled “FAQ On Notice of Coverage Options.”  While many employers are reading the guidance in the new FAQ On Notice of Coverage Options as justification for not sending the notice, some EBSA representatives asked about the FAQ are cautioning that its provisions does not mean that there is no consequence for not sending an Exchange Notice.  In the face of these conflicting messages, employers under pressure to decide what Exchange Notice, if any to send by October 1, 2013 are more confused than ever.

Exchange Notice Requirement Under 18B Due October 1

To promote awareness among employees of the option scheduled to take effect on January 1, 2014 under ACA to obtain health coverage through their state’s Marketplace, ACA amended the FLSA to require each FLSA-covered employer to give each employee a notice about the option to enroll in health coverage through a Marketplace and certain other information required by new Section 18B of the FLSA.

Although the Labor Department’s Wage & Hour Division usually interprets and administers the FLSA, EBSA as the agency with primary authority over health and other employee benefit plan regulation has taken the lead in interpreting and implementing FLSA Section 18B and issuing its implementing guidance.

In the EBSA interim guidance implementing Section 18B published in Technical Release 2013-02  and later communications and guidance prior to September 11, 2013, EBSA construes Section 18B as requiring that each employer covered by the FLSA “must” provide each employee at the time of hiring a written notice that meets the requirements of Section 18B to inform the employee:

  • Of the existence of the Marketplace (referred to in the statute as the Exchange) including a description of the services provided by the Marketplace, and the way the employee may contact the Marketplace to request assistance;
  • If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through the Marketplace; and
  • If the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.

According to Technical Release 2013-02, an employer covered by the FLSA must give each employee notice under FLSA Section 18B whether the employer offers coverage, whether a particular employee qualifies for health coverage, if any, offered by the employer, or both.

Since publishing Technical Release 2013-02, EBSA also continuously told employers Section 18B “requires” their timely delivery of Exchange Notices in Model Notices that the Labor Department said it published to help employers prepare their Exchange Notices to comply with Section 18B’s requirement to provide the Exchange Notice.  See Model Notice For Employers Who Offer A Health Plan To Some or All Employees; Model Notice for Employers Who Do Not Offer A Health Plan; and COBRA Model Election Notice.   Indeed, the Model Notice For Employers Who Offer A Health Plan To Some or All Employees reinforced this message by specifically delineating the employer’s completion of the last portion of the form by the employer as “optional.”  Likewise, the responses shared by EBSA representatives in response to questions from employers and others about Section 18B and the Model Notices caused employers to believe that employers faced liability if they didn’t timely give an Exchange Notice to their employees by the October 1, 2013 deadline established by the Labor Department.

9/11/13 FAQ On Notice of Coverage Options Not Necessarily Mean No Consequence For Not Giving Notice

In the face of the previous zealous efforts by the EBSA telling employers about their obligations under Section 18B and urging them to comply, EBSA’s announcement in its September 11, 2013 FAQ on Notice of Coverage Options is creating a stir among employers and their advisors.  The FAQ on Notice of Coverage Option and the responses of EBSA representatives to questions about its interpretation and effect are confusing to say the least.

In the FAQ on Notice of Coverage Options, the EBSA responds “No.” to the sole question addressed by the FAQ:  “Can an employer be fined for failing to provide employees with notice about the Affordable Care Act’s new Health Insurance Marketplace?”

EBSA representatives asked on the morning of September 12, 2013 about the FAQ on Notice of Coverage Options stated that while employers “should” and EBSA “encourages” employers to in fact provide the Exchange Notices, EBSA does not view employers as subject to any penalty under “ERISA” (emphasis added) for not providing an Exchange Notice in accordance with Section 18B of the FLSA.

On the other hand, statements made by other EBSA officials responding to questions about the implications of the FAQ on Notice of Coverage Options on the afternoon of September 12, 2013 raise concerns about reading the FAQ to mean that there is no consequence for an employer’s failure to provide the Exchange Notice.  These EBSA officials cautioned that employers should not interpret the statement in the FAQ on Notice of Coverage Options there is no penalty under ERISA for not providing the Exchange Notice as meaning that there will be no adverse consequence if an employer does not provide an 18B Exchange Notice to its employees.  On the contrary, these EBSA officials caution that EBSA may view the Exchange Notice as a required disclosure about the plan, which could trigger audit or other enforcement activity.

EBSA representatives also are declining to comment on whether not providing the Exchange Notice might trigger penalties or other liabilities from other agencies.  When asked whether employers failing to provide an Exchange Notice could face penalties imposed by the Department of Labor Wage & Hour division under the FLSA, the Internal Revenue Service under Section 8928 or other provisions of the Internal Revenue Code, the Department of Health & Human Services under the Public Health Services Act, plaintiffs’ in a private cause of action brought under ERISA or the FLSA, or otherwise, EBSA representatives declined to comment about the potential implications of an employer’s failure to provide an Exchange Notice in accordance with FLSA Section 18B under laws administered or construed by other agencies. EBSA representatives instead referred these inquiries for response to the applicable enforcement agency.

The author has contacted and is awaiting reply from the Department of Labor Wage & Hour Division and the Departments of Treasury and Health & Human Services on their position, if any, on the potential liability of an employer for failing to timely deliver and Exchange Notice under the laws and rules subject to that agency’s jurisdiction.  Stay tuned for any future updates.

Consult With Qualified Counsel About What To Do & Document Analysis

The ambiguities created by the EBSA’s release of the FAQ on Notice of Coverage Options make it more necessary than ever that employers obtain documented advice from qualified legal counsel about responding to the requirements of Section 18B of the FLSA.

Because the preparation and distribution of an Exchange Notice by necessity involves an employer in making statements about its employee benefit plans, employers generally should use care to prudently craft each statement in any Exchange Notice to fit the actual terms of the applicable health plan to which it relates to manage fiduciary liability and other potential liabilities potentially arising from sending an inaccurate or misleading the Exchange Notice.  See Employers Beware! DOL-Model FLSA Section 18B Exchange Notice Requires Tailoring!   Furthermore, depending on the size of the employer’s workforce, an employer generally must invest significant time and money to prepare and distribute the Exchange Notice to its employees.

In light of the EBSA’s position in FAQ on Notice of Coverage Options, employers may want to consult experienced legal counsel about whether to provide the Exchange Notice after all pending further guidance from the Employee Benefit Security Administration or other relevant agencies.  If and to the extent that an employer has or in the future does provide the Exchange Notice, employers also should consult with counsel on the appropriate tailoring of the content of the Exchange Notice.  Whether or not the employer elects to provide the Exchange Notice, however, employers and the plan fiduciaries, administrators and insurers that administer the employer’s health plan will want to ensure that the plan administrator or other appropriate named fiduciary of its health plan is timely preparing and distributing the Summary of Benefits and Communications (SBC), 60-day prior notice of material plan amendments reducing coverage or service, summary plan description and host of other notices required with respect to the health plan by ERISA and other applicable laws,  See e.g. Impending 10/1 Exchange Notice & Other New Notice Deadlines Cut Time Short For Employers To Finalize 2014 Health Plan Terms & Contracts.

In connection with these and other upcoming 2013 health plan preparations, employers and applicable health plan fiduciaries, insurers, and service providers should work together to ensure that plan terms and practices are carefully updated to meet new rules, as well as to tighten long-standing terms to promote enforceability and minimize fiduciary and other exposures.  All communications about the plan generally should both match as closely as possible the language contained in the official plan documents, as well as accurately identify the relevant named fiduciary and its role on the matters addressed, notify reads of the retained rights of the plan sponsor to amend the plan, and contain other appropriate disclaimers and disclosures.

For Help or More Information

If you need help understanding or dealing with these impending notification requirements, with other 2014 health plan decision-making or preparation, or with reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals. A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials about regulatory, investigatory or enforcement concerns.
Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, HR.com, Insurance Thought Leadership, Solutions Law Press, Inc. and other publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this of interest, you may also be interested in the following recent publications by Ms. Stamer published by Solutions Law Press, Inc. including:

For important information about this communication see here. THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS. ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2013 Cynthia Marcotte Stamer. Non-exclusive license to republish granted to Solutions Law Press, Inc. All other rights reserved.


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