Proposed FLSA Base Pay Rule Clarifies Overtime Treatment Of Perks

March 28, 2019

Employers frustrated with the current Fair Labor Standards Act (“FLSA”) rules defining what forms of payment employers must count as part of an employee’s “regular rate” when calculating overtime should evaluate and consider expressing support for the Department of Labor’s proposal announced today (March 28, 2019) to update its more than 50-year old regulations implementing the regular rate requirements under section 7(e) of FLSA  in 29 C.F.R. Parts 548 and 778.  Officially scheduled for publication in the May 28, 2019 Federal Register, employers and other interested persons may review the unofficial text of the  Notice of Proposed Rulemaking (“Proposed Rule”) released with the Labor Department’s announcement of its proposal today.  The Proposed Rule also will make substantive changes to the Labor Department’s current FLSA regulations about the treatment of “call back pay” and its base pay rules.

Regular Rate For Overtime

The FLSA generally requires employers to pay non-exempt employees overtime pay of at least one and one-half times the “regular rate” of pay for all hours worked in excess of 40 hours per workweek. Regular rate requirements define what forms of payment employers include and exclude in the “time and one-half” calculation when determining workers’ overtime rates. The existing rules define the regular rate to include both the base hourly rate of pay and certain bonus and other compensation and perks.  As the Trump Administration supports these proposed changes, employers should start evaluating their implications in anticipation of the Labor Department’s adoption of a Final Rule.  At the same time, businesses supporting the rule or desiring refinements to its provisions also will want to submit comments to the Labor Department no later than the May 18 comment deadline.

Ambiguities in the current more than 50-year-old Labor Department regulations implementing the regular rate requirement rules discourage employers from offering more perks to their employees because of uncertainty about whether the perks are required to be included in the regular rate of pay for purposes of calculating overtime pay.  In many other cases, employers that mistakenly fail to include bonuses, benefits and other perks often experience the unfortunate surprise of getting nailed with unexpected back pay and penalties obligations through Labor Department audits or private litigation.

The Proposed Rule primarily focuses on defining when employers must count bonuses, benefits, and other perks in an employee’s regular rate of pay when calculating overtime.  As proposed, the Proposed Rule would confirm that employers may exclude the following from an employee’s regular rate of pay:

  • the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services;
  • payments for unused paid leave, including paid sick leave;
  • reimbursed expenses, even if not incurred “solely” for the employer’s benefit;
  • reimbursed travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System and that satisfy other regulatory requirements;
  • discretionary bonuses, by providing additional examples and clarifying that the label given a bonus does not determine whether it is discretionary;
  • benefit plans, including accident, unemployment, and legal services; and
  • tuition programs, such as reimbursement programs or repayment of educational debt.
  • that employers do not need a prior formal contract or agreement with the employee(s) to exclude certain overtime premiums described in sections 7(e)(5) and (6) of the FLSA; and
  • that employers may exclude pay for time that would not otherwise qualify as “hours worked,” including bona fide meal periods,from an employee’s regular rate unless an agreement or established practice indicates that the parties have treated the time as hours worked.

In addition, the Proposed Rule also would make two substantive changes to the existing regulations on “call-back pay” and to its “basic rate” regulations.

Call-Back Pay

The Proposed Regulation would eliminate the current restriction in Labor Regulation §§ 778.221 and 778.222 that “call-back” pay and other payments similar to call-back pay must be “infrequent and sporadic” to be excludable from an employee’s regular rate, while maintaining that such payments must not be so regular that they are essentially prearranged.

Basic Rate

The Proposed Rule also  proposes an update the Labor Department’s “basic t rate” regulations.

Under the current regulations, employers using an authorized basic rate may exclude from the overtime computation any additional payment that would not increase
total overtime compensation by more than $0.50 a week on average for overtime work weeks in the period for which the employer makes the payment.

The Proposed Regulation would  change the current $0.50 limit to 40 percent of the federal minimum wage (currently $2.90.”  The Labor Department is inviting comments on if 40 percent is an appropriate threshold in its request for comments on the Propsoed Regulations.

Comment on the Proposed Rule & Other FLSA Rule Changes

Employers commenting on the Proposed Rule also should keep in mind that its publication comes on the heals of the Labor Department’s proposal of a new Proposed Salary Threshold Rule  that if adopted will increase to $679 per week the minimum salary an employee must earn to qualify for coverage by the “white collar” overtime exemption.  This would effectively raise the amount an employer must pay any worker it wants to treat as exempt under the white collar overtime exemption  from $23,660 annually to $35,308 annually. The adoption of this proposed Salary Threshold Rule as proposed overnight will disqualify a million plus currently salaried workers to hourly employees entitled to overtime under the FLSA.

Businesses concerned about the Proposed Rule or the Proposed Salary Threshold Rule should submit their feedback as comments to the applicable proposal during the applicable comment period.  May 28 is the deadline for employers and other interested persons to submit comments of support or other input on the Proposed Rule to change the regular rate determination rules.

Other Defensive Actions To Minimize FLSA Exposures

Whether or not the either of these proposed rule changes takes effect, U.S. businesses will want to strengthen their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws, tighten contracting and other compliance oversight in relation to outsourced services, weigh options to clean up exposure areas, review insurance coverages and consider other options to minimize their potential liability under applicable wages and hour laws.  Conducting this analysis within the scope of attorney-client privilege is important because the analysis and discussions are highly sensitive both as potential evidence for wage and hour and other legal purposes.  Consequently, businesses and their leaders generally will want to arrange for this work to be protected to the extent by attorney-client privilege, work product and other evidentiary protections against discovery by Department, employees or others for FLSA or other workforce enforcement actions.

As a part of this process, businesses and their leaders generally should plan to:

  • Review subcontractor, temporary, lease employee, independent contractor and other outsourced labor and services relationship for potential risk of worker reclassification and tighten contracting and other procedures;
  • Audit the position of each employee currently 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;
  • If the employer hires any individuals under age 18, audit and implement appropriate procedures to ensure its ability to demonstrate compliance with all applicable FLSA child labor rules;
  • If the employer is a government contractor or subcontractor or otherwise performs any services on projects funded with federal or state funds, evaluate the applicability and fulfillment of any special wage, fringe benefit, recordkeeping or other government contracting wage and hour requirements;
  • If the employer hires foreign agricultural or other workers subject to special conditions and requirements, to review compliance with those special requirements;
  • Review and tighten 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 employer uses leased, temporary, or other outsourced labor, evaluate contractual, process and other options to support the employer’s ability cost effectively to respond to an audit, investigation or enforcement action by the Labor Department or private litigants and if necessary, obtain indemnification or other recovery in the event the employer incurs liability due to the use or practices of the outsourced labor supplier;
  • 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 and document all workers classified as exempt;
  • Review of existing documentation and record keeping practices for hourly employees;
  • Evaluate potential exposures under other employment, labor, tax or related laws or contracts that might be impacted by the findings or actions taken in response to those findings;
  • Explore available options and alternatives for calculating required wage payments to non-exempt employees and assessing and resolving other concerns;
  • Identify and calculate other employee benefit, tax or other corrections and associated costs and procedures that may be required as a result of findings or corrective actions resulting from their redress;
  • Re-engineer work rules, policies, contracts and practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures;
  • Explore insurance, indemnification and other options for mitigating risks and associated investigation and defense costs; and
  • Consider self-correction within the new PAID Program or otherwise.

If you need more information or have questions, contact the author, Cynthia Marcotte Stamer.  We also invite you to share your own best practices ideas and resources and join the discussions about these and other human resources, health and other employee benefit and patient empowerment concerns by participating and contributing to the discussions onLinkedIn.

About the Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 30+ years of management focused wage and hour and other employment, employee benefit and insurance, workforce and other management work, public policy leadership and advocacy, coaching, teachings, and publications.

Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer’s clients include employers and other workforce management organizations; employer, union, association, government and other insured and self-insured health and other employee benefit plan sponsors, benefit plans, fiduciaries, administrators, and other plan vendors;   domestic and international public and private health care, education and other community service and care organizations; managed care organizations; insurers, third-party administrative services organizations and other payer organizations;  and other private and government organizations and their management leaders.

Throughout her  career, Ms. Stamer has continuously worked with these and other management clients to design, implement, document, administer and defend hiring, performance management, compensation, promotion, demotion, discipline, reduction in force and other workforce, employee benefit, insurance and risk management, health and safety, and other programs, products and solutions, and practices; establish and administer compliance and risk management policies; comply with requirements, investigate and respond to government, accreditation and quality organizations, regulatory and contractual audits, private litigation and other federal and state reviews, investigations and enforcement actions; evaluate and influence legislative and regulatory reforms and other regulatory and public policy advocacy; prepare and present training and discipline;  handle workforce and related change management associated with mergers, acquisitions, reductions in force, re-engineering, and other change management; and a host of other workforce related concerns. Ms. Stamer’s experience in these matters includes supporting these organizations and their leaders on both a real-time, “on demand” basis with crisis preparedness, intervention and response as well as consulting and representing clients on ongoing compliance and risk management; plan and program design; vendor and employee credentialing, selection, contracting, performance management and other dealings; strategic planning; policy, program, product and services development and innovation; mergers, acquisitions, bankruptcy and other crisis and change management; management, and other opportunities and challenges arising in the course of workforce and other operations management to improve performance while managing workforce, compensation and benefits and other legal and operational liability and performance.

Past Chair of the ABA Managed Care & Insurance Interest Group and, a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, heavily involved in health benefit, health care, health, financial and other information technology, data and related process and systems development, policy and operations throughout her career, and scribe of the ABA JCEB annual Office of Civil Rights agency meeting, Ms. Stamer also is widely recognized for her extensive work and leadership on leading edge health care and benefit policy and operational issues. She regularly helps employer and other health benefit plan sponsors and vendors, health industry, insurers, health IT, life sciences and other health and insurance industry clients design, document and enforce plans, practices, policies, systems and solutions; manage regulatory, contractual and other legal and operational compliance; transactional and other change management; regulatory affairs and public policy; process, product and service improvement, development and innovation; and other legal and operational compliance and risk management, government and regulatory affairs and operations concerns.

A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in pensions, healthcare, workforce, immigration, tax, education and other areas, Ms. Stamer has been extensively involved in U.S. federal, state and local health care and other legislative and regulatory reform impacting these concerns throughout her career. Her public policy and regulatory affairs experience encompasses advising and representing domestic and multinational private sector health, insurance, employee benefit, employer, staffing and other outsourced service providers, and other clients in dealings with Congress, state legislatures, and federal, state and local regulators and government entities, as well as providing advice and input to U.S. and foreign government leaders on these and other policy concerns.

Author of leading works on wage and hour and a multitude of labor and employment, compensation and benefits, internal controls and compliance, and risk management matters and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; an ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

For more information about Ms. Stamer or her services, experience and involvements, see here or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here such as 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 your profile here.  We also invite you to join the discussion of these and other human resources, health and other employee benefit and patient empowerment concerns by participating and contributing to the discussions Linkedin or Facebook

NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advise or an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The presenter and the program sponsor disclaim, and have no responsibility to provide any update or otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department 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.

©2019 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ For information about republication or the topic of this article, please contact the author .directly. All other rights reserved.


Give Labor Department Feedback On Proposed $124 Per Week Increase In FLSA Salary Threshold & Other Burdensome Rules

March 19, 2019

Employers concerned about minimum wage, overtime and other liability from the Proposed Salary Threshold Rule (“Proposal”) that if adopted will increase the minimum salary for the Fair Labor Standards Act (“FLSA”) “white collar” overtime exemption from $23,660 annually to $35,308 annually. If adopted as proposed, the Proposal overnight will disqualify a million plus currently salaried workers to hourly employees that their employers will be required to pay minimum wage and overtime under the FLSA.  Businesses concerned about the Proposal or other burdensome minimum wage or overtime requirements under the FLSA need to tell the Labor Department about these rules burdensome effects on business.

Proposal To Raise Minimum Salary For Overtime Exemption

The Labor Department Proposal if adopted will increase to $679 per week the minimum amount that an employer must pay an employee to treat that employee as exempt from the minimum wage or overtime rules of the FLSA regardless of the role or position of the employee.  This means that an additional million plus employees overnight no longer would qualify to be paid as salaried rather than hourly employees.  The Proposal

Under currently enforced FLSA rules, employers generally must treat any employee earning less than $455 per week ($23,660 annually) as a non-exempt employee.  This generally means that the employer must pay the employee at least minimum wage for regular time and must pay overtime to the worker for any hours worked in excess of 40 hours per week.

The Labor Department set the minimum weekly earnings level of $455 per week in 2004.  The Proposal if adopted will increase the minimum required earnings an employee must earn to qualify for exemption from minimum wage and overtime rules more than $124 per week to $679 per week (equivalent to $35,308 per year).

The Department also is asking for public comment on the Proposal’s language for periodic review to update the salary threshold. An update would continue to require notice-and-comment rule making rather than calling for automatic adjustments to the salary threshold for inflation.

Speak Up About Proposal & Other FLSA Burdens On Business

Businesses concerned about Proposal to increase the salary threshold or other burdensome FLSA rules or enforcement policies should seize the opportunity to provide feedback.

To start with, businesses should submit comments about the Proposed Rule electronically at www.regulations.gov as soon as possible before the 60-day comment period runs in mid-May.

Additionally, concerned businesses also should consider participating in events like the Small Business Roundtables that the Small Business Administration (“SBA”) Office of Advocacy plans to host to discuss the Proposal to hear directly from small businesses about the impact of the proposed rule.  Currently SBA plans to host three roundtables:

  • Thursday April 4, 2019 –  2:00 pm – 4:00 pm (EDT) at the University of South Florida Port Tampa Bay, Building 1101 Channelside Dr., Suite 210, Tampa, FL 33602;
  • Thursday April 11, 2019 – 2:00 pm – 4:00 pm (EDT) at the SBA Headquarters, Eisenhower Room B 409 Third Street SW, Washington, DC 20416 (Call-in option available); and
  • Tuesday April 30, 2019 – 9:00 am – 11:00 am (CDT) at the Mobile Area Chamber of Commerce 451 Government St., Mobile, Alabama 36602

Interested parties must RSVP to Janis.Reyes@sba.gov to participate.  Note that while SBA reports that SBA has invited Labor Department staff, the Labor Department has not confirmed its acceptance of these invitations yet.  Also, because comments expressed during these roundtables do not take the place of submitting written comments to the regulatory docket, concerned businesses should also still comment on the Proposal.  However adverse feedback from business expressed at this meeting could help to motivate SBA to express opposition or other negative feedback on the Proposal.

Other Defensive Actions To Minimize FLSA Exposures

Whether or not the Proposal takes effect, all U.S. businesses will want to strengthen their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws, tighten contracting and other compliance oversight in relation to outsourced services, weigh options to clean up exposure areas, review insurance coverages and consider other options to minimize their potential liability under applicable wages and hour laws.  Conducting this analysis within the scope of attorney-client privilege is important because the analysis and discussions are highly sensitive both as potential evidence for wage and hour and other legal purposes.  Consequently, businesses and their leaders generally will want to arrange for this work to be protected to the extent by attorney-client privilege, work product and other evidentiary protections against discovery by Department, employees or others for FLSA or other workforce enforcement actions.

As a part of this process, businesses and their leaders generally should plan to:

  • Review subcontractor, temporary, lease employee, independent contractor and other outsourced labor and services relationship for potential risk of worker reclassification and tighten contracting and other procedures;
  • Audit the position of each employee currently 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;
  • If the employer hires any individuals under age 18, audit and implement appropriate procedures to ensure its ability to demonstrate compliance with all applicable FLSA child labor rules;
  • If the employer is a government contractor or subcontractor or otherwise performs any services on projects funded with federal or state funds, evaluate the applicability and fulfillment of any special wage, fringe benefit, recordkeeping or other government contracting wage and hour requirements;
  • If the employer hires foreign agricultural or other workers subject to special conditions and requirements, to review compliance with those special requirements;
  • Review and tighten existing practices for tracking compensible 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 employer uses leased, temporary, or other outsourced labor, evaluate contractual, process and other options to support the employer’s ability cost effectively to respond to an audit, investigation or enforcement action by the Labor Department or private litigants and if necessary, obtain indemnification or other recovery in the event the employer incurs liability due to the use or practices of the outsourced labor supplier;
  • 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 and document all workers classified as exempt;
  • Review of existing documentation and record keeping practices for hourly employees;
  • Evaluate potential exposures under other employment, labor, tax or related laws or contracts that might be impacted by the findings or actions taken in response to those findings;
  • Explore available options and alternatives for calculating required wage payments to non-exempt employees and assessing and resolving other concerns;
  • Identify and calculate other employee benefit, tax or other corrections and associated costs and procedures that may be required as a result of findings or corrective actions resulting from their redress;
  • Re-engineer work rules, policies, contracts and practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures;
  • Explore insurance, indemnification and other options for mitigating risks and associated investigation and defense costs; and
  • Consider self-correction within the new PAID Program or otherwise.

If you need more information or have questions, contact the author, Cynthia Marcotte Stamer.

 About The Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for management work, coaching, teachings, and publications.

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. Her day-to-day work encompasses both labor and employment issues, as well as independent contractor, outsourcing, employee leasing, management services and other nontraditional service relationships. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with all aspects for workforce and human resources management, including, recruitment, hiring, firing, compensation and benefits, promotion, discipline, compliance, trade secret and confidentiality, noncompetition, privacy and data security, safety, daily performance and operations management, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

The author of the “Texas Payday Act,” and numerous other highly regarded publications on wage and hour and other human resources, employee benefits and compensation publications, Ms. Stamer is well-known for her 30 years of extensive wage and hour, compensation and other management advice and representation of restaurant and other hospitality, health, insurance, financial services, technology, energy, manufacturing, retail, governmental and other domestic and international businesses of all types and sizes.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other concerns by her service as a management consultant,  business coach and consultant and policy strategist as well through her leadership participation in professional and civic organizations such her involvement as the Vice Chair of the North Texas Healthcare Compliance Association; Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Gulf Coast TEGE Council Exempt Organization Coordinator; a founding Board Member and past President of the Alliance for Healthcare Excellence; former board member and Vice President of the Managed Care Association; past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; a member and policy adviser to the National Physicians’ Council for Healthcare Policy; current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee; current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section; Past Chair of the ABA Health Law Section Managed Care & Insurance Section; ABA Real Property Probate and Trust (RPTE) Section former Employee Benefits Group Chair, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative, and Defined Contribution Committee Co-Chair, past Welfare Benefit Committee Chair and current Employee Benefits Group Fiduciary Responsibility Committee Co-Chair, Substantive and Group Committee member, Membership Committee member and RPTE Representative to the ABA Health Law Coordinating Council; past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former member of the Board of Directors, Treasurer, Member and Continuing Education Chair of the Southwest Benefits Association and others.

Ms. Stamer also is a widely published author, highly popular lecturer, and serial symposia chair, who publishes and speaks extensively on human resources, labor and employment, employee benefits, compensation, occupational safety and health, and other leadership, performance, regulatory and operational risk management, public policy and community service concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications.

Want to know more? See here for details about the author of this update, attorney Cynthia Marcotte Stamer, e-mail her here or telephone Ms. Stamer at (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here 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 your profile here.

NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The presenter and the program sponsor disclaim, and have no responsibility to provide any update or otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department 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.

©2019 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™  For information about republication, please contact the author directly. All other rights reserved.

 


Labor Department Proposes Increasing FLSA Salary Threshold To $679 Per Week

March 7, 2019

Employers concerned about managing their overtime liability should review and provide prompt feedback to the U.S. Department of Labor (Department) on a Notice of Proposed Rulemaking (NPRM) that would make an additional million plus American workers eligible for overtime under the Fair Labor Standards Act (“FLSA”) by increasing the minimum amount an employee must earn to be eligible for treatment as FLSA exempt to $679 per week.

Under currently enforced FLSA rules, employers generally must treat any employee earning less than $455 per week ($23,660 annually) as a non-exempt employee.  This generally means that the employer must pay the employee at least minimum wage for regular time and must pay overtime to the worker for any hours worked in excess of 40 hours per week.

The minimum weekly earnings level of $455 per week was set in 2004.  The proposed regulation would increase the salary threshold using current wage data projected to January 1, 2020 from $455 to $679 per week (equivalent to $35,308 per year).

The Department also is asking for public comment on the NPRM’s language for periodic review to update the salary threshold. An update would continue to require notice-and-comment rulemaking.

The NPRM maintains overtime protections for police officers, fire fighters, paramedics, nurses, and laborers including: non-management production-line employees and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, and construction workers. The proposal does not call for automatic adjustments to the salary threshold.

The proposal to change the salary threshold in the NPRM follows a prior attempt by the Department of raise the threshold in 2016.  The U.S. District Court for the Eastern District of Texas enjoined a 2016 final regulation that would have raised the threshold on November 22, 2016.  Since November 6, 2017, the U.S. Court of Appeals for the Fifth Circuit has held in abeyance the Department’s appeal of the District Court’s ruling pending further rulemaking by the Department.  In the 15 years since the District Court enjoined its 2016 final rule, the Department consistently has enforced the 2004 salary threshold level.

Employers concerned about the proposed increase in the salary threshold or other elements of the NPRM should submit comments about the proposed rule electronically at www.regulations.gov within the 60 day period following publication, in the rulemaking docket RIN 1235-AA20.

The NPRM proposing to increase the salary threshold for qualification as a FLSA-exempt employee is only one of a number of proposed rule changes that could significantly impact employer liabilities and costs.

Coupled with the Department’s continuing aggressive attacks against contract labor and other worker misclassification as well as other minimum wage, overtime and other FLSA rules, all employers should shore up the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws, tighten contracting and other compliance oversight in relation to outsourced services, weigh options to clean up exposure areas, review insurance coverages and consider other options to minimize their potential liability under applicable wages and hour laws.  Conducting this analysis within the scope of attorney-client privilege is important because the analysis and discussions are highly sensitive both as potential evidence for wage and hour and other legal purposes.  Consequently, businesses and their leaders generally will want to arrange for this work to be protected to the extent by attorney-client privilege, work product and other evidentiary protections against discovery by Department, employees or others for FLSA or other workforce enforcement actions.

As a part of this process, businesses and their leaders generally should plan to:

  • Review subcontractor, temporary, lease employee, independent contractor and other outsourced labor and services relationship for potential risk of worker reclassification and tighten contracting and other procedures;
  • Audit the position of each employee currently 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;
  • If the employer hires any individuals under age 18, audit and implement appropriate procedures to ensure its ability to demonstrate compliance with all applicable FLSA child labor rules;
  • If the employer is a government contractor or subcontractor or otherwise performs any services on projects funded with federal or state funds, evaluate the applicability and fulfillment of any special wage, fringe benefit, recordkeeping or other government contracting wage and hour requirements;
  • If the employer hires foreign agricultural or other workers subject to special conditions and requirements, to review compliance with those special requirements;
  • Review and tighten 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 employer uses leased, temporary, or other outsourced labor, evaluate contractual, process and other options to support the employer’s ability cost effectively to respond to an audit, investigation or enforcement action by WHD or private litigants and if necessary, obtain indemnification or other recovery in the event the employer incurs liability due to the use or practices of the outsourced labor supplier;
  • 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 and document all workers classified as exempt;
  • Review of existing documentation and record keeping practices for hourly employees;
  • Evaluate potential exposures under other employment, labor, tax or related laws or contracts that might be impacted by the findings or actions taken in response to those findings;
  • Explore available options and alternatives for calculating required wage payments to non-exempt employees and assessing and resolving other concerns;
  • Identify and calculate other employee benefit, tax or other corrections and associated costs and procedures that may be required as a result of findings or corrective actions resulting from their redress;
  • Re-engineer work rules, policies, contracts and practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures;
  • Explore insurance, indemnification and other options for mitigating risks and associated investigation and defense costs; and
  • Consider self-correction within the new PAID Program or otherwise.

If you need more information or have questions, contact the author, Cynthia Marcotte Stamer.

 About The Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for management work, coaching, teachings, and publications.

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. Her day-to-day work encompasses both labor and employment issues, as well as independent contractor, outsourcing, employee leasing, management services and other nontraditional service relationships. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with all aspects for workforce and human resources management, including, recruitment, hiring, firing, compensation and benefits, promotion, discipline, compliance, trade secret and confidentiality, noncompetition, privacy and data security, safety, daily performance and operations management, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

The author of the “Texas Payday Act,” and numerous other highly regarded publications on wage and hour and other human resources, employee benefits and compensation publications, Ms. Stamer is well-known for her 30 years of extensive wage and hour, compensation and other management advice and representation of restaurant and other hospitality, health, insurance, financial services, technology, energy, manufacturing, retail, governmental and other domestic and international businesses of all types and sizes.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other concerns by her service as a management consultant,  business coach and consultant and policy strategist as well through her leadership participation in professional and civic organizations such her involvement as the Vice Chair of the North Texas Healthcare Compliance Association; Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Gulf Coast TEGE Council Exempt Organization Coordinator; a founding Board Member and past President of the Alliance for Healthcare Excellence; former board member and Vice President of the Managed Care Association; past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; a member and policy adviser to the National Physicians’ Council for Healthcare Policy; current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee; current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section; Past Chair of the ABA Health Law Section Managed Care & Insurance Section; ABA Real Property Probate and Trust (RPTE) Section former Employee Benefits Group Chair, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative, and Defined Contribution Committee Co-Chair, past Welfare Benefit Committee Chair and current Employee Benefits Group Fiduciary Responsibility Committee Co-Chair, Substantive and Group Committee member, Membership Committee member and RPTE Representative to the ABA Health Law Coordinating Council; past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former member of the Board of Directors, Treasurer, Member and Continuing Education Chair of the Southwest Benefits Association and others.

Ms. Stamer also is a widely published author, highly popular lecturer, and serial symposia chair, who publishes and speaks extensively on human resources, labor and employment, employee benefits, compensation, occupational safety and health, and other leadership, performance, regulatory and operational risk management, public policy and community service concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications.

Want to know more? See here for details about the author of this update, attorney Cynthia Marcotte Stamer, e-mail her here or telephone Ms. Stamer at (469) 767-8872.

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NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The presenter and the program sponsor disclaim, and have no responsibility to provide any update or otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

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©2019 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™  For information about republication, please contact the author directly. All other rights reserved.

 


Creative Pay & Time Keeping Requires FLSA Compliance & Risk Management

December 27, 2018

Today’s diverse business environment creates a demand for businesses to think creatively about their employment relationships, including creative scheduling and pay arrangements. While many of these arrangements produce win/win solutions for both the business and its employees, businesses need to use care properly to evaluate and manage minimum wage, overtime, and other wage and hour law responsibilities under the Fair Labor Standards Act (“FLSA”) and applicable state law.

A new Department of Labor Wage and Hour Division (WHD) Fair Labor Standards Act (FLSA) opinion letter published December 21 illustrates this point. WHD Opinion Letter FLSA 2018-28 (Dec. 21, 2018) evaluates FLSA minimum wage and overtime compliance of one employer’s innovative strategy of paying certain hourly employees one hourly rate while the employee was working with clients and a second, lower hourly rate of pay for time that the employee spent traveling between client sites throughout the day.

In WHD Opinion Letter FLSA 2018-28 (Dec. 21, 2018), the WHD expresses reservations about whether the specific practices of the requesting employer for calculating overtime for workers paid different hourly rates for different categories of work during the same work week fulfill the FLSA overtime requirements under certain circumstances, but blessed the compliance of the practice of the employer with the FLSA minimum wage rules.

While only the employer that actually requested the ruling that resulted in the Opinion actually may rely upon the Opinion, the ruling highlights both the potential opportunity for businesses to structure innovative compensation and scheduling arrangements within the requirements of the FLSA and other laws, as well as the legal exposures that employers using innovative staffing and compensation arrangement risk by failing to appropriately manage these responsibilities.

FLSA Minimum Wage & Overtime Requirements Generally

The FLSA generally requires that employers pay covered, nonexempt employees receive at least the federal minimum wage (currently $7.25 per hour) for all hours worked. See 29 U.S.C. § 206(a)(1). According to previously published WHD guidance, WHD will consider an employer to have fulfilled this requirement “if the employee’s total wages for the workweek divided by compensable hours equal or exceed the applicable minimum wage.” See WHD Opinion Letter FLSA2004-8NA (Aug. 12, 2004)(different pay rates for trucking company workers); WHD Field Operations Handbook § 30b02.

In addition to the requirement to pay at least the minimum wage, the FLSA also requires that covered, nonexempt employees receive overtime compensation of at least one and one-half times their regular rate of pay for time worked in excess of 40 hours per workweek. See 29 U.S.C. § 207(a)(1). To  determine the regular rate of pay for purposes of calculating the required overtime, an employer generally divides the employee’s “remuneration for employment” (subject to the exclusions in 29 U.S.C. § 207(e)) by the total hours worked for the workweek. See 29 C.F.R. § 778.109.

WHD Opinion Letter FLSA 2018-28

In WHD Opinion Letter FLSA 2018-28 (Dec. 21, 2018), WHD addressed its views regarding a home health provider’s practice for calculating the wages due to home health aide services that traveled to home health clients’ homes, who were required to travel to different client home locations during the workday. The employer establishes different rates of pay for time spent working with clients versus time spent traveling from location to location.  To calculate weekly pay, that employer multiplied an employee’s time with clients by his hourly pay rate established by the employer for time spent working with clients.  The employer then divides the product by the employee’s total hours worked, which includes both the client time and the travel time. The employer guarantees that the quotient meets both federal and state minimum wage rate requirements.

According to the facts published in the WHD Opinion Letter, the home health provider represented that a typical standard rate of pay is $10.00 per hour with a client including travel time,” and that “[i]f any employee works over 40 hours (total paid hours and [travel] time) in any given workweek, the employer pays the employee time and a half for all time over 40 hours at a rate of $10.00.”

Based upon the factual representations made by the home health agency, WHD ruled the employer’s compensation plan complies with the FLSA’s minimum wage requirements but expressed concern about whether the employer’s practices for calculating overtime complied with the FLSA.

Concerning the FLSA minimum wage compliance, the WHD found that the employers practice fulfilled the FLSA minimum wage requirements because even though the employee’s average hourly pay rate varied from workweek to workweek, the employer always ensured that the average hourly pay rate exceeded the FLSA’s minimum wage requirement for all hours worked.

In contrast, however, WHD expressed concern about the compliance of the employer’s compensation plan with the FLSA’s overtime requirements under certain circumstances. WHD states in the Opinion that the employer will not pay all overtime due to employees whose actual rate of pay exceeds $10 per hour if the employer always assumes a regular rate of pay of $10 per hour when calculating overtime due.  See  29 C.F.R. § 778.107.

The Opinion notes that “neither an employer nor an employee may arbitrarily choose the regular rate of pay; it is an “actual fact” based on “mathematical computation.” Walling v. Youngerman-Reynolds Hardwood Co., Inc., 325 U.S. 419, 424–25 (1945); 29 C.F.R. § 778.108.

On the other hand, the Opinion also states that the employer’s compensation plan would comply with the FLSA’s overtime requirements for all employees whose actual regular rates of pay are less than $10 per hour, as an employer may choose to pay an overtime premium in excess of the required amount. See, e.g., Molina v. First Line Solutions LLC, 566 F. Supp. 2d 770, 779 (N.D. Ill. 2007).

The cautionary lessons from FLSA Opinion 2018-28 echo those WHD previously has issued alerting businesses to the need to use care to properly understand and meet FLSA requirements when structuring and administering two-tier hourly pay or other innovative pay and scheduling arrangements.

The need to attend to the details of FLSA compliance when adopting and administering customized pay arrangements is further illustrated by WHD’s review of the FLSA compliance of a school district employer’s customized pay arrangement for its drivers in FLSA2004-8NA in 2004.  While the WHD found issues with the FLSA compliance of the special arrangement as administered by the school district, guidance provided by the Opinion also makes clear the type of adjustments to the arrangement the employer would need to adopt and apply to continue using the arrangement in its modified form. 

Specifically, FLSA 2004-8NA considered a school district’s contractually negotiated arrangement to pay its drivers pursuant to a contractual arrangement under which the employer agreed to pay regular drivers a specified hourly rate with a minimum guarantee of two hours driving time pay per route/additional assignment. The contract also provided that for an assigned trip of less than two hours, a driver that wanted to receive pay for hte minimum guaranteed time had to perform regular maintenance in the bus garage or other work as assigned by the School District to complete the two hours.  Furthermore, the contract also specified that “Any regular driver may complete a voucher for payment for additional time if their morning or afternoon route exceeds his/her assigned time by one half hour or more” and that the employers only would pay additional wages for the actual added time worked to employees that worked at least 30 minutes or more without rounding to the next hour for calculating wages.  Thus,  an employee that worked an additional twenty-five minutes beyond his/her normal shiftwould not be compensated for the extra time worked.  Meanwhile, a bus driver that returned fifty minutes past the scheduled time received pay for an additional 50 minutes of work.

WHD’s issue with the arrangement was that the rounding practices applied under the arrangement meant that the school district did not ensure that workers were paid at least the minimum wage per hour for all hours worked and might under some circumstances not properly pay overtime due to workers.

While acknowledging that Labor Regulation Section 785.47 allows employers to disregard ‘insubstantial or insignificant periods of time outside the scheduled working hours that cannot practically be precisely recorded as de minimis,  WHD noted that the de minimis rule applies only where a few seconds or minutes of work are involved and where the failure to count such time is due to considerations justified by industrial realities.  It does not allow an employer by contract or otherwise to arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed or regular working time. Where an employer fails to pay an employee for any part of the employee’s fixed or regular working time, however small, this would be considered a violation of the FLSA.

Concerning the FLSA’s requirement that the employer pay hourly employees at least the minimum wage, WHD noted that in non-overtime workweeks or in workweeks in which the overtime provisions do not apply, WHD would consider the employer to have met the minimum wage requirement  if the employee’s total wages for the workweek divided by compensable hours equal or exceed the applicable minimum wage.  WHD added that this principle would apply even if the employer technically did not compensate the emploeye for time which is compensable under the FLSA.

Concerning the overtime requirements of the FLSA, however, WHD had greater reservations.  As WHD noted in the 2004 Opinion, when a covered and non-exempt employee works overtime, a different rule applies. The FLSA overtime rule requires that an employer pay the employee for all hours worked at the agreed rate plus the overtime premium (one-half the regular rate) for all overtime hours.  Therefore, before an employee can be said to be paid statutory overtime compensation due, the employee must first be paid all straight time wages due for all hours worked under any express or implied contract or under any applicable statute (see 29 CFR Part 778.315).  As a result, WHD found that the FLSA overtime requirements would require the employer both to ensure that the employee actually was paid for each hour of straight time at the regular rate of pay plus time and a half of the regular rate of pay for each overtime hour worked.

WHD additionally noted in the 2004 Opinion that the employer also risked violation of Labor Regulation 516.2(a)(7)’s requirement that the employer maintain accurate recordkeeping of hours worked each workday and total hours worked each workweek for covered, nonexempt employees if the payroll records do not accurately record the number of hours worked in one or more of the workdays.

Takeaways For Other Employers About Using Variable Pay Rates & Other Innovative Scheduling & Pay Practices

While other employers actually cannot rely upon  either WHD Opinion Letter FLSA 2018-28, FLSA 2004-8NA, or most other WHD Opinion Letters, WHD Opinion Letters and other publishe guidance, as well as judicial precedent and the enforcement conduct by WHD provide a wealth of valuable insights for other employers about the potential FLSA opportunities and pitfalls of using variable rates of pay or other innovative compensation, scheduling and timekeeping practices for compensating hourly employees.  Employers using or contemplating using innovative compensation, scheduling or recordkeeping practices should should seek assistance from experienced legal counsel with accessing and using this guidance to help reduce the risk that a proposed innovative compensation or other practice for scheduling or paying nonexempt hourly workers will trigger unanticipated FLSA or other liabilities..

Make Wage & Hour Compliance & Risk Management Priority To Reduce Exposures

Aside from using caution to properly calculate and pay overtime for workers paid different rates for different types of work, employers also need to use care to avoid other common FLSA and other wage and hour overtime violations.

With the Trump Administration U.S. Department of Labor Wage and Hour Division (WHD) continuing its aggressive investigation and enforcement of minimum wage, overtime and other Fair Labor Standards Act (FLSA) and other wage and hour laws it used to recover more than $1.2 billion in back pay for workers over the past five years, Agriculture, Amusement, Apparel Manufacturing, Auto Repair, Child Care Services, Construction, Food Services, Guard Services, Hair, Nail & Skin Care Services, Health Care, Hotels and Motels, Janitorial Services, Landscaping Services, Retail, and Temporary Help and other U.S. employers should evaluate their current and past potential liability exposures and consider using the new pilot WHD self-audit Payroll Audit Independent Determination (PAID) program announced by WHD on March 6 or other options to mitigate their liability for their own or temporary or other contract labor’s existing or past minimum wage and hour law violations.

U.S. employers and leaders with wage and hour management authority risk substantial liability from unresolved violations of the FLSA and other federal and state wage and hour laws.

One of the most frequently violated and litigated federal employment laws, the FLSA generally requires that U.S. employers pay nonexempt employees at least $7.25 per hour for all regular compensable hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. In general, FLSA “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. Similar state or local laws often also impose higher minimum wage, compensable hour, break and other requirements than federal law requires.

The FLSA and most applicable state and local wage and hour laws also mandate that employers maintain records of the hours worked by employees by non-exempt employees, documentation of the employer’s proper payment of its non-exempt employees in accordance with the minimum wage and overtime mandates of the FLSA, and certain other records and prohibit retaliation by an employer or other person again an employee or other person for asserting rights under the law or cooperating in a WHD investigation about FLSA compliance.

Beyond these FLSA minimum wage and overtime requirements, WHD regulations and court decisions provide guidance on when an employer must treat “on-call” time, travel time, meal and break times, and certain other time periods as compensable hours worked by a non-exempt employee, when “comp time” in lieu of the payment of wages is permitted, various alternative methods for calculating overtime under certain special circumstances, and various other rules applicable to various special circumstances. Other special rules also can apply to businesses employing tipped employees, home workers, child labor, certain farm workers, workers working with special visas, and other special classes or workers.   Furthermore, collective bargaining agreements or other contracts or other federal, state or local laws also sometimes impose additional requirements for employers to pay higher “prevailing wages,” apply special rules for counting compensable work hours, and provide specified fringe benefits or other special compensation or protections or other wages, when the employer is a government contractor or subcontractor covered by the Service Contract Act, the Davis Bacon Act or other similar federal or state statutes.

Over the past decade, WHD and private enforcement of the FLSA and other wage and hour laws generally has skyrocketed in part driven by the Obama Administration’s prioritization on raising the minimum wage, extending federal wage and hour protections, and expanding WHD and other enforcement.  WHD’s success in recovering more than $1.2 billion in back pay for workers over the past five years and other achievements in expanding its own and private oversight and enforcement and the continuation of these efforts under the Trump Administration means all employers need to view wage and hour law as a major liability risk requiring conscientious management.   However, the risk of enforcement is particularly acute for businesses in the following industries, designed for heightened enforcement and other attention as “Low Wage High Violation Industries” based on their particularly high record of noncompliance:  Agriculture, Amusement, Apparel Manufacturing, Auto Repair, Child Care Services, Construction, Food Services, Guard Services, Hair, Nail & Skin Care Services, Health Care, Hotels and Motels, Janitorial Services, Landscaping Services, Retail, and Temporary Help.

Scrutiny & Challenges To Contract & Outsourced Labor Relationships Rising

Beyond assessing their FLSA and other wage and hour compliance and associated exposures from the worker on their own payroll, U.S. employers and their leaders also should take care to carefully evaluate potential exposures from nontraditional services relationships and act to manage those risks.

Misclassification of workers providing services as non-employees increasingly causes U.S. businesses to incur unanticipated FLSA and other wage and hour law liability for back pay, liquidated punitive damages, civil monetary penalties and other liability, in part because of WHD’s stepped up worker education, scrutiny, investigation, and enforcement challenging employers’ treatment of workers as non-employees.

The FLSA and state and local rules 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. The FLSA and most other wage and hour laws generally rules presume that workers rendering services are common law employees of the business in most circumstances. Businesses should evaluate their FLSA exposures from both workers they recognize as common law employees and those performing services in capacities that the business typically does not view as common law or otherwise covered by the FLSA when managing FLSA compliance and evaluating exposures, employers should exercise care not to overlook potential responsibilities and exposures associated with outsourced services provided through relationships characterized by the employer as subcontractors, independent contractors, lease employees, or other common outsourced relationships.

Court decisions and regulations provide guidance for determining when leased, contract, jointly employed, independent contractor or other non-traditionally employed workers will be treated as employees of a business,  As in many other enforcement areas, The WHD and many other agencies increasingly view the misclassification of workers as something other than employees, such as independent contractors, leased employees and other common “outsourced” relationship 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.

In response to these concerns, WHD published guidance warning employers about misclassification of workers about potential violation of the FLSA by improper misclassification of workers as independent contractors or non-employed. See Department of Labor Issues Guidance of Misclassification of Workers.  DOL’s key points in the guidance are that:

  • Most workers are employees under the broad definitions of the FLSA;
  • No single factor is determinative;
  • Employers should be wary of classifying workers as independent contractors merely because the workers control some aspects of their work; and
  • The ultimate question is whether a worker “is really in business for him or herself (and thus is an independent contractor) or is economically dependent on the employer (and thus is an employee).

Other guidance makes clear that WHD and other agencies concerns about misclassification extend beyond workers labeled independent contractors to include scrutiny of subcontractor, day labor, temporary, leased employee and a broad range of other outsourced services relationships.  See here,

Consistent with these principles, WHD and private litigants in recent years have increasingly scrutinized and successfully challenged employers’ failure to comply with the FLSA’s minimum wage, overtime, recordkeeping and other rules with respect to these outsourced workers.  See e.g., $1.4M FLSA Back Pay Award Demonstrates Worker Misclassification Risks; Employer Faces $2M FLSA Lawsuit For Alleged Worker Misclassification; $754,578 FLSA Settlement Shows Employer Risks From Worker Misclassification, Underpayment;   WHD now both conducts significant worker education outreach and regularly requests and scrutinizes the characterization of and FLSA compliance of outsourced workers in connection with its FLSA investigations and audits.  See e.g. Get the Facts on Misclassification Under the FLSA; Am I an Employee?: Employment Relationship Under the Fair Labor Standards Act (FLSA); Compliance Assistance Page – Fair Labor Standards Act; Elaws: Independent Contractors; Know Your Rights Video Series: Misclassification as an Independent Contractor; WHD Press Releases about employee Misclassification as Independent Contractors.  These and other developments are significantly increasing the likelihood that businesses will face WHD or private litigants challenges to its FLSA compliance relating to workers rendering services as independent contractors, subcontractors or other outsourced services providers.

Employers often face substantial challenges responding to, much less, containing their FLSA exposures when a WHD or a private litigant successfully challenges the employer’s classification of the worker as a non-employee for a variety of reasons.  Beyond the likelihood of violations resulting from the employer’s failure to recognize it might owe minimum wage and overtime duties to the worker, an employer often lacks records and other data needed to fulfill recordkeeping and posting requirements and to accurately demonstrate hours worked and hourly rates to limit resulting back pay exposures because these workers are not treated as part of the employer’s workforce. Obtaining the necessary records to respond to a WHD or other investigation, lawsuit or other action often proves challenging because the independent contractor, leasing company, or other provider or of the services often becomes unavailable, is disincentivized by its own noncompliance or other interests, has failed to maintain necessary documentation or otherwise fails to cooperate in the delivery of these materials.  Furthermore, as leased employee, staffing, independent contractor and other outsourced arrangements invoice services at higher rates of compensation payment than the employer might otherwise have paid a traditionally employed worker, the lack of records and elevated compensation rates tend to push up the compensation used to calculate back pay and other awards. Accordingly, employers utilizing these arrangements should use care in structuring and administering these arrangements properly to evaluate their likely FLSA and other treatment and to manage these risks.

FLSA Big Liability Risk

Under the FSLA and applicable state wage and hour laws, violations of the FLSA and other federal or state wage and hour laws expose employers to substantial back pay, interest and punitive damages, civil monetary penalties for willful or and in the case of willful or repeated violations and in the case of willful violations, criminal prosecution.

Because of the ability to recover liquidated damages and attorneys’ fees in addition to unpaid back pay, private enforcement of the FLSA is common.  The FLSA generally allows employees wrongfully denied wages in violation of the FLSA to bring lawsuits to enforce their rights provided that the WHD has not or does not intervene to enforce those rights on the worker’s behalf.  Workers successfully proving an employer violated their FLSA rights typically can recover back pay, plus liquidated damages, interest, attorneys’ fees and other costs of enforcement from the breaching employer.  In some cases, Corporate officers such as CEOs, CFOs or COOs and other management leaders with control over the breaching employer’s financial affairs also be held personally liable for the unpaid wages  See e.g., Lamonica v. Safe Hurricane Shutters+2013 U.S. App. LEXIS 4599 (11th Cir. 2013)(ruling personal liability for FLSA violations can attach to any individual with control over an employer’s financial affairs who could potentially cause an employer to violate FLSA).

As an alternative to private litigation, the FLSA empowers the WHD to supervise or if necessary, enforce through litigation the rights of workers against a breaching employer to recover back pay plus  liquidated damages in an amount equal to the wrongfully denied wages. WHD also can pursue injunctive relief against noncompliant employers.

When the employer is a repeat offender or willfully violated the FLSA, additional consequences attach.  A violation is “willful” for purposes of FLSA criminal prosecution if it is deliberate, voluntary, and intentional. A fine of up to $10,000 on the first conviction

When an employer’s violation of the FLSA is repetitious or willful, the FLSA empowers WHD to impose civil money penalties (CMPs) against the noncompliant employer in addition to the recovery of back pay and liquidated damages. Intended to discourage future noncompliance by an employer guilty of violating the FLSA, CMPs for a “repeated” violation are assessable when the employer had previously violated the minimum wage or overtime requirements of the FLSA. CMPs for a “willful” violation may be assessed when it can be shown that the employer knew that its conduct was prohibited by the FLSA or showed reckless disregard for the requirements of the FLSA.  CMPs ordinarily are imposed based on violations occurring within the normal two-year investigation period. Where violations are determined to be willful, the investigation will cover a three-year period.

The applicable 2018 CMP amounts, which are adjusted annually for inflation, are as follows:

 

Type of Violation Statutory Citation CFR Citation Maximum Civil Monetary Penalty on or before 1/2/2018 Maximum Civil Monetary Penalty on or after 1/3/2018
Homeworker:

Violation of recordkeeping, monetary, certificate or other statutes, regulations or employer assurances.

29 USC 211(d) 29 CFR 530.302 $1,005 $1,026
Child labor:

(1) Violation of child labor standards (sec 212 or 213(c));

29 USC 216(e)(1)(A)(i) 29 CFR 570.140(b)(1) and 29 CFR 579.1(a)(1)(i)(A) $12,278 $12,529
(2) Violation of child labor standards (sec 212 or 213(c)) that causes the serious injury or death of a minor; 29 USC 216(e)(1)(A)(ii) 29 CFR 570.140(b)(2) and 29 CFR 579.1(a)(1)(i)(B) $55,808 $56,947
(3) Willful or repeated violation of child labor standards (sec 212 or 213(c)) that causes the serious injury or death of a minor 29 USC 216(e)(1)(A)(ii) 29 CFR 570.140(b)(2) and 29 CFR 579.1(a)(1)(i)(B) $111,616 $113,894
(4) Repeated or willful violation of section 206 or 207. 29 USC 216(e) 29 CFR 579.1(a)(2) $1,925 $1,964
Minimum Wage and Overtime:

Repeated or willful violation of section 206 or 207.

29 USC 216(e)(2) 29 CFR 578.3(a) $1,925 $1,964

Although typically reserved for more egregious violations, “willful” violations of the FLSA can trigger criminal prosecution by the Department of Justice. A fine of up to $10,000, or a term of imprisonment of up to six months, or both, on all convictions after the first conviction

In addition to or instead of lawsuits by the Secretary of Labor for back wages or injunctive relief, willful violation of the FLSA also can trigger criminal prosecutions against an employer by the Department of Justice.  Criminal penalties for willful FLSA violations include a fine of up to $10,000, or a term of imprisonment of up to six months, or both, on all convictions after the first conviction.  Since enforcement actions by the DOJ can be brought instead of or in addition to lawsuits by WHD for back wages or injunctive relief, an employer that willfully violates the FLSA can be ordered to pay liquidated damages and back-pay, as well as any court imposed criminal fine or penalty.

Always popular, WHD and private enforcement of the FLSA initially spiked upward following the highly publicized George W. Bush Administration’s implementation of updated FLSA “white collar” regulations regarding the classification of workers as exempt.  The Obama Administration’s highly publicized, but unsuccessful, campaign to increase the minimum wage and aggressive FLSA educational outreach and enforcement further fueled this trend.  While President Trump has opposed proposals to increase the federal minimum wage, he has expressed his commitment to protect workers’ FLSA rights through continued vigorous enforcement of the FLSA minimum wage, overtime and other rules.

As a result of its aggressive enforcement commitments, WHD takes credit for having recovered more than $1.2 billion in back wages on behalf of more than 1.3 million workers over the past five years. See here.  The following WHD enforcement statistics reflect that its commitment to FLSA enforcement has continued during President Trump’s tenure in office.

Cases with Violations Back Wages Employees Receiving Back Wages(duplicated 1)
FY 2011 Minimum Wage 12,450 $29,327,527 89,305
Overtime 11,990 $140,328,012 204,243
FY 2012 Minimum Wage 12,532 $35,270,524 107,005
Overtime 12,462 $148,560,700 218,137
FY 2013 Minimum Wage 12,403 $38,470,100 103,671
Overtime 12,108 $130,703,222 174,197
FY 2014 Minimum Wage 11,042 $36,732,407 106,184
Overtime 11,238 $136,239,001 174,365
FY 2015 Minimum Wage 10,642 $37,828,554 86,229
Overtime 10,496 $137,701,703 173,330
FY 2016 Minimum Wage 10,722 $34,964,350 81,870
Overtime 10,884 $171,917,225 209,819
FY 2017 Minimum Wage 10,687 $31,213,737 69,588
Overtime 10,823 $157,592,682 183,272

Pilot PAID Program May Offer New Option To Resolve WHD Exposures

When an audit uncovers potential violations, some employers may want to explore options to voluntarily resolve their exposures.  To encourage voluntary compliance, the WHD on March 6, 2018 announced a new pilot self-audit Payroll Audit Independent Determination (PAID) program that offered employers accepted into the program after voluntarily disclosing violations to resolve their exposure WHD penalties and liquidated damages commonly assessed by WHD against employers for violating the FLSA minimum wage and overtime violations by:

  • Voluntarily disclosing the violations to WHD before becoming subject to investigation or enforcement and requesting admission to the program;
  • Paying affected workers 100 percent of the unpaid back pay due wrongfully denied by the end of the next full pay period after receiving the summary of unpaid wages from WHD confirming the back pay amount;
  • Working with WHD prospectively to correct noncompliant practices; and
  • Taking other actions to correct and prevent a recurrence of those violations.

Originally slated as a pilot program set to expire after six months, the PAID program remains an opportunity offered by WHD on its website, which also shares “testimonials” from various employers that report having participated in the PAID program.

While participation in the PAID program purpoerts to offer allows a participating employer to settle its exposure to prosecution for those violations by WHD without incurring some of themore extraordinary penalties that WHD is authorized to assess, many practitioners and employers report having achieved similar and in some cases even more favorable outcomes through negotiations conducted outside the PAID program.  Furthermore, many employers may face challenges in using the program as a result of the inability to marshal the required capital to pay 100 percent of the back pay due within the required time period.

Beyond this challenge, employers evaluating whether to seek relief through the new PAID program also may need to weigh a variety of other concerns.

For instance, employers considering participation need to understand that the settlement only addresses potential liability from WHD enforcement.  While WHD’s requirement that a participating employer pay affect 100 percent of any wrongfully denied back pay to the impacted employees generally would reduce the actual back pay damages recoverable by an employee in a private enforcement action, WHD says settlements reached with the WHD under the PAID program does not prevent employees wrongfully denied wages in violation of FSLA from bringing private lawsuits.  Rather, WHD states that it will be purely the employee’s choice whether to accept the payment of back wages the employer agrees to pay under the PAID program settlement. If the employee chooses to not accept the payment, the employee will not release any private right of action. Additionally, if the employee chooses to accept the payment, the employee will not grant a broad release of all potential claims under the FLSA. Rather, the releases are tailored to only the identified violations and time period for which the employer is paying the back wages. The WHD also cautions that regardless of whether the employee accepts or rejects the back pay specified in the PAID program, the FLSA will prohibit employers from retaliating against the employee for his or her choice. Furthermore, while the payment of previously unpaid amounts could reduce the amount of unpaid wages for purposes of determining liability for state wage and hour law violations, the WHD settlement does not directly impact or release liability for any state wage and hour violations.

While any FLSA covered employer may use the program, interested employers should understand that acceptance into the program is not automatic and is not available for all FLSA violations.  Rather, the PAID program only covers potential violations of the FLSA’s overtime and minimum wage requirements that an employer self-identifies and voluntarily discloses and resolves in accordance with its PAID program settlement with WHD.  An employer cannot use the PAID program to resolve any issues for which WHD is already investigating the employer, or which the employer is already litigating in court, arbitration, or otherwise. An employer likewise may not initiate the process when an employee’s representative or counsel has already communicated an interest in litigating or settling the issue.   Employers using the Paid program also must be prepared to correct the noncompliant practices that resulted in the violations settled under the PAID program.  According to the WHD, WHD will not allow employers to use the program to repeatedly resolve the same violations, as this program is designed to identify and correct non-compliant practices. By allowing employers to participate in the PAID program, WHD also does not waive its right to conduct any future investigations of the employer.

Employers contemplating participation in the PAID program generally should conduct a self-audit after updating their understanding of WHD program and compliance assistance materials and other WHD guidance.  Because the information, analysis and discussions conducted in this process may be legally sensitive, employers generally will want to engage qualified legal counsel before initiating these processes to advise and assist the employer about the adequacy and risks of its existing practices, recommendations for redressing known compliance issues and other risks as well as opportunities and procedures for qualifying certain of these actions and discussions for coverage under attorney-client privilege, attorney work product or other evidentiary protections.

Whether or not an employer decides based on the audit to pursue compliance resolution through the PAID program, employers generally should work with their legal counsel within the scope of attorney client privilege to organize and retain documentation of their audit, its findings of compliance and, for any potential compliance issues, corrective actions taken to redress those issues retrospectively and prospectively, and other documentation that the employer might need to pursue resolution under the PAID program or otherwise respond to and defend against a WHD or private charges brought by an employee in the future.

If the employer wishes to pursue resolution of potential violations under the PAID program based on review of the audit findings in conjunction with their legal counsel, the employer in coordination with the legal counsel within the scope of attorney client privilege should work together to prepare and assemble the records and information WHD will expect the employer to provide in the initial phases of the process including:

  • A list of the specific potential violations uncovered
  • The specific employees affected
  • The specific timeframes in which each employee was affected, and
  • The calculation of the amount of back wages the employer believes are owed to each employee.
  • Each of the calculations described above—accompanied by both evidence and explanation concerning how the calculations were made;
  • A concise explanation of the scope of the potential violations for possible inclusion in a release of liability;
  • A certification that the employer reviewed all of the information, terms, and compliance assistance materials;
  • A certification that the employer is not litigating the compensation practices at issue in court, arbitration, or otherwise, and likewise has not received any communications from an employee’s representative or counsel expressing interest in litigating or settling the same issues; and
  • A certification that the employer will adjust its practices to avoid the same potential violations in the future.

After preparing this information, the employer generally will want to arrange for legal counsel to make the preliminary contact to the WHD to request that the WHD admit the employer to the PAID program.  During the preliminary contact, the WHD will require that a list of the specific potential violations, and the identity, specific time frame and back pay amount that employer believes it owes to each affected employee as a prerequisite to considering the request for admission to the program.  If the WHD approves the employer’s request, WHD will require that the employer or its legal counsel on its behalf provide the remaining information listed above.  After evaluating this information, WHD will provide notification of the next steps, including the collection of any other information necessary for WHD to assess and confirm the back wages due for the identified violations.

Current published guidance states that after WHD assesses the back wages due, it will issue a summary of unpaid wages. WHD will also issue forms describing the settlement terms for each employee, which employees may sign to receive payment. The release of claims provided in the form will match the previously agreed-upon language and, again, must be limited to only the potential violations for which the employer had paid back wages. The PAID program settlement will require the employers to pay the back pay amounts confirmed in the summary of unpaid wages promptly and in full by the end of the next payroll period after receiving the WHD summary of wages confirming the back pay amounts required.

Audit & Act To Mitigate FLSA & Other Wage & Hour Risks

Regardless of whether an employer elects to pursue using the new PAID program, all FLSA covered employers generally should consult with legal counsel within the scope of attorney-client privilege to assess the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws, tighten contracting and other compliance oversight in relation to outsourced services, and about using the PAID program and other options to minimize their potential liability under applicable wages and hour laws.  Conducting this analysis within the scope of attorney-client privilege is important because the analysis and discussions are highly sensitive both as potential evidence for wage and hour and other legal purposes.  Consequently, businesses and their leaders generally will want to arrange for this work to be protected to the extent by attorney-client privilege, work product and other evidentiary protections against discovery by WHD, employees or others for FLSA or other workforce enforcement actions.

As a part of this process, businesses and their leaders generally should plan to:

  • Review subcontractor, temporary, lease employee, independent contractor and other outsourced labor and services relationship for potential risk of worker reclassification and tighten contracting and other procedures;
  • Audit the position of each employee currently 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;
  • If the employer hires any individuals under age 18, audit and implement appropriate procedures to ensure its ability to demonstrate compliance with all applicable FLSA child labor rules;
  • If the employer is a government contractor or subcontractor or otherwise performs any services on projects funded with federal or state funds, evaluate the applicability and fulfillment of any special wage, fringe benefit, recordkeeping or other government contracting wage and hour requirements;
  • If the employer hires foreign agricultural or other workers subject to special conditions and requirements, to review compliance with those special requirements;
  • Review and tighten 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 employer uses leased, temporary, or other outsourced labor, evaluate contractual, process and other options to support the employer’s ability cost effectively to respond to an audit, investigation or enforcement action by WHD or private litigants and if necessary, obtain indemnification or other recovery in the event the employer incurs liability due to the use or practices of the outsourced labor supplier;
  • 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 and document all workers classified as exempt;
  • Review of existing documentation and record keeping practices for hourly employees;
  • Evaluate potential exposures under other employment, labor, tax or related laws or contracts that might be impacted by the findings or actions taken in response to those findings;
  • Explore available options and alternatives for calculating required wage payments to non-exempt employees and assessing and resolving other concerns;
  • Identify and calculate other employee benefit, tax or other corrections and associated costs and procedures that may be required as a result of findings or corrective actions resulting from their redress;
  • Re-engineer work rules, policies, contracts and practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures;
  • Explore insurance, indemnification and other options for mitigating risks and associated investigation and defense costs .
  • Pursue self-correction within the new PAID Program or otherwise.

Many employers also will want to consider adopting or strengthening their use of arbitration agreements, strengthening contract compliance, audit, indemnification and other contractual safeguards in staffing and other outsourcing contracts and broadening employment practices and other liability insurance coverage to mitigate and manage these exposures.

For additional information, please contact the author or other qualified legal counsel with health industry wage and hour and other labor and employment experience.

 About The Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for management work, coaching, teachings, and publications.

Ms. Stamer is nationally and internationally recognized for her work assisting businesses, governments, and other entities to develop, implement, administer and defend pragmatic strategies for dealing with employment and other workforce and related compensation, employee benefit,  performance management and internal controls, insurance, health care and finance concerns to manage risk, operations and other business objectives.

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. Her day-to-day work encompasses both labor and employment issues, as well as independent contractor, outsourcing, employee leasing, management services and other nontraditional service relationships. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with all aspects for workforce and human resources management, including, recruitment, hiring, firing, compensation and benefits, promotion, discipline, compliance, trade secret and confidentiality, noncompetition, privacy and data security, safety, daily performance and operations management, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

The author of the “Texas Payday Act,” and numerous other highly regarded publications on wage and hour and other human resources, employee benefits and compensation publications, Ms. Stamer is well-known for her 30 years of extensive wage and hour, compensation and other management advice and representation of restaurant and other hospitality, health, insurance, financial services, technology, energy, manufacturing, retail, governmental and other domestic and international businesses of all types and sizes.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other concerns by her service as a management consultant,  business coach and consultant and policy strategist as well through her leadership participation in professional and civic organizations such her involvement as the Vice Chair of the North Texas Healthcare Compliance Association; Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Gulf Coast TEGE Council Exempt Organization Coordinator; a founding Board Member and past President of the Alliance for Healthcare Excellence; former board member and Vice President of the Managed Care Association; past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; a member and policy adviser to the National Physicians’ Council for Healthcare Policy; current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee; current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section; Past Chair of the ABA Health Law Section Managed Care & Insurance Section; ABA Real Property Probate and Trust (RPTE) Section former Employee Benefits Group Chair, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative, and Defined Contribution Committee Co-Chair, past Welfare Benefit Committee Chair and current Employee Benefits Group Fiduciary Responsibility Committee Co-Chair, Substantive and Group Committee member, Membership Committee member and RPTE Representative to the ABA Health Law Coordinating Council; past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former member of the Board of Directors, Treasurer, Member and Continuing Education Chair of the Southwest Benefits Association and others.

Ms. Stamer also is a widely published author, highly popular lecturer, and serial symposia chair, who publishes and speaks extensively on human resources, labor and employment, employee benefits, compensation, occupational safety and health, and other leadership, performance, regulatory and operational risk management, public policy and community service concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications.

Want to know more? See here for details about the author of this update, attorney Cynthia Marcotte Stamer, e-mail her here or telephone Ms. Stamer at (469) 767-8872.

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NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The presenter and the program sponsor disclaim, and have no responsibility to provide any update or otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

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Identity Theft Scan Targets Employee Tax Records

December 7, 2018

The Internal Revenue Service is warning human resources and other business leaders about a growing wave of identity theft and W-2 scams targeting sensitive tax data employers collect on their employees. The warning highlights one of the many growing data breach exposures businesses must manage as identity thieves become ever more sophisticated.

Such data like Form W-2 data – is highly valued by identity thieves. While identity thieves use a variety of tactics to steal this information including hacking into the IRS’ own systems, the IRS this week is warning about one scheme that the IRS says has become one of the more dangerous email scams.

All employers are targets for the W-2 scam, according to the IRS.

Here’s how it works:

  • These emails appear to be from an executive or organization leader to a payroll or human resources employee.
  • The message usually starts with a simple greeting, like: “Hey, you in today?”
  • By the end of the email exchange, all of an organization’s Forms W-2 for their employees may be in the hands of cybercriminals.
  • Because payroll officials believe they are corresponding with an executive, it may take weeks for someone to realize a data theft has occurred.
  • Generally, the criminals are trying to quickly take advantage of their theft, sometimes filing fraudulent tax returns a day or two.

The IRS warns this scam is such a threat to taxpayers that a special IRS reporting process has been established. The IRS says employers victimized should:

  • Email dataloss@irs.gov to notify the IRS of a W-2 data loss and provide contact information. In the subject line, type “W2 Data Loss” so that the email can be routed properly. The business should not attach any employee personally identifiable information data.
  • Email the Federation of Tax Administrators at StateAlert@taxadmin.org to get information on how to report victim information to the states.
  • File a complaint with the FBI’s Internet Crime Complaint Center. Businesses and payroll service providers may be asked to file a report with their local law enforcement agency.
  • Notify employees. The employee may then take steps to protect themselves from identity theft. The Federal Trade Commission’s www.identitytheft.govprovides guidance on general steps employees should take.
  • Forward the scam email to phishing@irs.gov.
  • The IRS also recommends the following resources:
  • The IRS alert reminds businesses again about the growing challenges they face guarding sensitive tax, health and other employee benefit plan and other data about employees, customers, business partners and others. Aside from the disruptions businesses incur to organizations and relationships with employees, customers, business partners or others and often tremendous costs of investigation and mitigation, breaches also commonly trigger substantial legal liability under a myriad of federal and state laws and regulations, contracts, and common law tort claims. Businesses generally and Human Resources, tax and other systems and operations should take well documented steps to prevent and prepare for a potential breach.
  • About the Author

    Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 30+ years of management focused employment, employee benefit and insurance, workforce and other management work, public policy leadership and advocacy, coaching, teachings, and publications.

    Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving and author of “What To Do When Your Employee’s Personal Life Becomes Your Business@ and a multitude of other highly regarded works on data protection and breach, her work includes career-long, leading edge involvement counseling and representing human resources, employee benefit, insurance and financial, tax, healthcare and other businesses about data and other sensitive information privacy and breach.

    Ms. Stamer’s clients include employers and other workforce management organizations; employer, union, association, government and other insured and self-insured health and other employee benefit plan sponsors, benefit plans, fiduciaries, administrators, and other plan vendors;   domestic and international public and private health care, education and other community service and care organizations; managed care organizations; insurers, third-party administrative services organizations and other payer organizations;  and other private and government organizations and their management leaders.

    Throughout her 30 plus year career, Ms. Stamer has continuously worked with these and other management clients to design, implement, document, administer and defend hiring, performance management, compensation, promotion, demotion, discipline, reduction in force and other workforce, employee benefit, insurance and risk management, health and safety, and other programs, products and solutions, and practices; establish and administer compliance and risk management policies; comply with requirements, investigate and respond to government, accreditation and quality organizations, regulatory and contractual audits, private litigation and other federal and state reviews, investigations and enforcement actions; evaluate and influence legislative and regulatory reforms and other regulatory and public policy advocacy; prepare and present training and discipline;  handle workforce and related change management associated with mergers, acquisitions, reductions in force, re-engineering, and other change management; and a host of other workforce related concerns. Ms. Stamer’s experience in these matters includes supporting these organizations and their leaders on both a real-time, “on demand” basis with crisis preparedness, intervention and response as well as consulting and representing clients on ongoing compliance and risk management; plan and program design; vendor and employee credentialing, selection, contracting, performance management and other dealings; strategic planning; policy, program, product and services development and innovation; mergers, acquisitions, bankruptcy and other crisis and change management; management, and other opportunities and challenges arising in the course of workforce and other operations management to improve performance while managing workforce, compensation and benefits and other legal and operational liability and performance.

    Past Chair of the ABA Managed Care & Insurance Interest Group and, a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, heavily involved in health benefit, health care, health, financial and other information technology, data and related process and systems development, policy and operations throughout her career, and scribe of the ABA JCEB annual Office of Civil Rights agency meeting, Ms. Stamer also is widely recognized for her extensive work and leadership on leading edge health care and benefit policy and operational issues. She regularly helps employer and other health benefit plan sponsors and vendors, health industry, insurers, health IT, life sciences and other health and insurance industry clients design, document and enforce plans, practices, policies, systems and solutions; manage regulatory, contractual and other legal and operational compliance; vendors and suppliers; deal with Medicare, Medicaid, CHIP, Medicare/Medicaid Advantage, ERISA, state insurance law and other private payer rules and requirements; contracting; licensing; terms of participation; medical billing, reimbursement, claims administration and coordination, and other provider-payer relations; reporting and disclosure, government investigations and enforcement, privacy and data security; and other compliance and enforcement; Form 990 and other nonprofit and tax-exemption; fundraising, investors, joint venture, and other business partners; quality and other performance measurement, management, discipline and reporting; physician and other workforce recruiting, performance management, peer review and other investigations and discipline, wage and hour, payroll, gain-sharing and other pay-for performance and other compensation, training, outsourcing and other human resources and workforce matters; board, medical staff and other governance; strategic planning, process and quality improvement; HIPAA administrative simplification, meaningful use, EMR, HIPAA and other technology, data security and breach and other health IT and data; STARK, antikickback, insurance, and other fraud prevention, investigation, defense and enforcement; audits, investigations, and enforcement actions; trade secrets and other intellectual property; crisis preparedness and response; internal, government and third-party licensure, credentialing, accreditation, HCQIA, HEDIS and other peer review and quality reporting, audits, investigations, enforcement and defense; patient relations and care; internal controls and regulatory compliance; payer-provider, provider-provider, vendor, patient, governmental and community relations; facilities, practice, products and other sales, mergers, acquisitions and other business and commercial transactions; government procurement and contracting; grants; tax-exemption and not-for-profit; 1557 and other Civil Rights; privacy and data security; training; risk and change management; regulatory affairs and public policy; process, product and service improvement, development and innovation, and other legal and operational compliance and risk management, government and regulatory affairs and operations concerns.

    A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in pensions, healthcare, workforce, immigration, tax, education and other areas, Ms. Stamer has been extensively involved in U.S. federal, state and local health care and other legislative and regulatory reform impacting these concerns throughout her career. Her public policy and regulatory affairs experience encompasses advising and representing domestic and multinational private sector health, insurance, employee benefit, employer, staffing and other outsourced service providers, and other clients in dealings with Congress, state legislatures, and federal, state and local regulators and government entities, as well as providing advice and input to U.S. and foreign government leaders on these and other policy concerns.

    Author of leading works on a multitude of labor and employment, compensation and benefits, internal controls and compliance, and risk management matters and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; an ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

    For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

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    Employers Should Weigh New DOL PAID Program, Other Options To Manage Rising FLSA Minimum Wage & Overtime Risks

    April 12, 2018

    With the Trump Administration U.S. Department of Labor Wage and Hour Division (WHD) continuing its aggressive investigation and enforcement of minimum wage, overtime and other Fair Labor Standards Act (FLSA) and other wage and hour laws it used to recover more than $1.2 billion in back pay for workers over the past five years, Agriculture, Amusement, Apparel Manufacturing, Auto Repair, Child Care Services, Construction, Food Services, Guard Services, Hair, Nail & Skin Care Services, Health Care, Hotels and Motels, Janitorial Services, Landscaping Services, Retail, and Temporary Help and other U.S. employers should evaluate their current and past potential liability exposures and consider using the new pilot WHD self-audit Payroll Audit Independent Determination (PAID) program announced by WHD on March 6 or other options to mitigate their liability for their own or temporary or other contract labor’s existing or past minimum wage and hour law violations.

    FLSA & Other Wage & Hour Law Exposures & Enforcement Mounting Legal & Business Risk

    U.S. employers and leaders with wage and hour management authority risk substantial liability from unresolved violations of the FLSA and other federal and state wage and hour laws.

    One of the most frequently violated and litigated federal employment laws, the FLSA generally requires that U.S. employers pay nonexempt employees at least $7.25 per hour for all regular compensable hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. In general, FLSA “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. Similar state or local laws often also impose higher minimum wage, compensable hour, break and other requirements than federal law requires.

    The FLSA and most applicable state and local wage and hour laws also mandate that employers maintain records of the hours worked by employees by non-exempt employees, documentation of the employer’s proper payment of its non-exempt employees in accordance with the minimum wage and overtime mandates of the FLSA, and certain other records and prohibit retaliation by an employer or other person again an employee or other person for asserting rights under the law or cooperating in a WHD investigation about FLSA compliance.

    Beyond these FLSA minimum wage and overtime requirements, WHD regulations and court decisions provide guidance on when an employer must treat “on-call” time, travel time, meal and break times, and certain other time periods as compensable hours worked by a non-exempt employee, when “comp time” in lieu of the payment of wages is permitted, various alternative methods for calculating overtime under certain special circumstances, and various other rules applicable to various special circumstances. Other special rules also can apply to businesses employing tipped employees, home workers, child labor, certain farm workers, workers working with special visas, and other special classes or workers.   Furthermore, collective bargaining agreements or other contracts or other federal, state or local laws also sometimes impose additional requirements for employers to pay higher “prevailing wages,” apply special rules for counting compensable work hours, and provide specified fringe benefits or other special compensation or protections or other wages, when the employer is a government contractor or subcontractor covered by the Service Contract Act, the Davis Bacon Act or other similar federal or state statutes.

    Over the past decade, WHD and private enforcement of the FLSA and other wage and hour laws generally has skyrocketed in part driven by the Obama Administration’s prioritization on raising the minimum wage, extending federal wage and hour protections, and expanding WHD and other enforcement.  WHD’s success in recovering more than $1.2 billion in back pay for workers over the past five years and other achievements in expanding its own and private oversight and enforcement and the continuation of these efforts under the Trump Administration means all employers need to view wage and hour law as a major liability risk requiring conscientious management.   However, the risk of enforcement is particularly acute for businesses in the following industries, designed for heightened enforcement and other attention as “Low Wage High Violation Industries” based on their particularly high record of noncompliance:  Agriculture, Amusement, Apparel Manufacturing, Auto Repair, Child Care Services, Construction, Food Services, Guard Services, Hair, Nail & Skin Care Services, Health Care, Hotels and Motels, Janitorial Services, Landscaping Services, Retail, and Temporary Help.

    Scrutiny & Challenges To Contract & Outsourced Labor Relationships Rising

    Beyond assessing their FLSA and other wage and hour compliance and associated exposures from the worker on their own payroll, U.S. employers and their leaders also should take care to carefully evaluate potential exposures from nontraditional services relationships and act to manage those risks.

    Misclassification of workers providing services as non-employees increasingly causes U.S. businesses to incur unanticipated FLSA and other wage and hour law liability for back pay, liquidated punitive damages, civil monetary penalties and other liability, in part because of WHD’s stepped up worker education, scrutiny, investigation, and enforcement challenging employers’ treatment of workers as non-employees.

    The FLSA and state and local rules 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. The FLSA and most other wage and hour laws generally rules presume that workers rendering services are common law employees of the business in most circumstances. Businesses should evaluate their FLSA exposures from both workers they recognize as common law employees and those performing services in capacities that the business typically does not view as common law or otherwise covered by the FLSA when managing FLSA compliance and evaluating exposures, employers should exercise care not to overlook potential responsibilities and exposures associated with outsourced services provided through relationships characterized by the employer as subcontractors, independent contractors, lease employees, or other common outsourced relationships.

    Court decisions and regulations provide guidance for determining when leased, contract, jointly employed, independent contractor or other non-traditionally employed workers will be treated as employees of a business,  As in many other enforcement areas, The WHD and many other agencies increasingly view the misclassification of workers as something other than employees, such as independent contractors, leased employees and other common “outsourced” relationship 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.

    In response to these concerns, WHD published guidance warning employers about misclassification of workers about potential violation of the FLSA by improper misclassification of workers as independent contractors or non-employed. See Department of Labor Issues Guidance of Misclassification of Workers.  DOL’s key points in the guidance are that:

    • Most workers are employees under the broad definitions of the FLSA;
    • No single factor is determinative;
    • Employers should be wary of classifying workers as independent contractors merely because the workers control some aspects of their work; and
    • The ultimate question is whether a worker “is really in business for him or herself (and thus is an independent contractor) or is economically dependent on the employer (and thus is an employee).

    Other guidance makes clear that WHD and other agencies concerns about misclassification extend beyond workers labeled independent contractors to include scrutiny of subcontractor, day labor, temporary, leased employee and a broad range of other outsourced services relationships.  See here,

    Consistent with these principles, WHD and private litigants in recent years have increasingly scrutinized and successfully challenged employers’ failure to comply with the FLSA’s minimum wage, overtime, recordkeeping and other rules with respect to these outsourced workers.  See e.g., $1.4M FLSA Back Pay Award Demonstrates Worker Misclassification Risks; Employer Faces $2M FLSA Lawsuit For Alleged Worker Misclassification; $754,578 FLSA Settlement Shows Employer Risks From Worker Misclassification, Underpayment;   WHD now both conducts significant worker education outreach and regularly requests and scrutinizes the characterization of and FLSA compliance of outsourced workers in connection with its FLSA investigations and audits.  See e.g. Get the Facts on Misclassification Under the FLSA; Am I an Employee?: Employment Relationship Under the Fair Labor Standards Act (FLSA); Compliance Assistance Page – Fair Labor Standards Act; Elaws: Independent Contractors; Know Your Rights Video Series: Misclassification as an Independent Contractor; WHD Press Releases about employee Misclassification as Independent Contractors.  These and other developments are significantly increasing the likelihood that businesses will face WHD or private litigants challenges to its FLSA compliance relating to workers rendering services as independent contractors, subcontractors or other outsourced services providers.

    Employers often face substantial challenges responding to, much less, containing their FLSA exposures when a WHD or a private litigant successfully challenges the employer’s classification of the worker as a non-employee for a variety of reasons.  Beyond the likelihood of violations resulting from the employer’s failure to recognize it might owe minimum wage and overtime duties to the worker, an employer often lacks records and other data needed to fulfill recordkeeping and posting requirements and to accurately demonstrate hours worked and hourly rates to limit resulting back pay exposures because these workers are not treated as part of the employer’s workforce. Obtaining the necessary records to respond to a WHD or other investigation, lawsuit or other action often proves challenging because the independent contractor, leasing company, or other provider or of the services often becomes unavailable, is disincentivized by its own noncompliance or other interests, has failed to maintain necessary documentation or otherwise fails to cooperate in the delivery of these materials.  Furthermore, as leased employee, staffing, independent contractor and other outsourced arrangements invoice services at higher rates of compensation payment than the employer might otherwise have paid a traditionally employed worker, the lack of records and elevated compensation rates tend to push up the compensation used to calculate back pay and other awards. Accordingly, employers utilizing these arrangements should use care in structuring and administering these arrangements properly to evaluate their likely FLSA and other treatment and to manage these risks.

    FLSA Big Liability Risk

    Under the FSLA and applicable state wage and hour laws, violations of the FLSA and other federal or state wage and hour laws expose employers to substantial back pay, interest and punitive damages, civil monetary penalties for willful or and in the case of willful or repeated violations and in the case of willful violations, criminal prosecution.

    Because of the ability to recover liquidated damages and attorneys’ fees in addition to unpaid back pay, private enforcement of the FLSA is common.  The FLSA generally allows employees wrongfully denied wages in violation of the FLSA to bring lawsuits to enforce their rights provided that the WHD has not or does not intervene to enforce those rights on the worker’s behalf.  Workers successfully proving an employer violated their FLSA rights typically can recover back pay, plus liquidated damages, interest, attorneys’ fees and other costs of enforcement from the breaching employer.  In some cases, Corporate officers such as CEOs, CFOs or COOs and other management leaders with control over the breaching employer’s financial affairs also be held personally liable for the unpaid wages  See e.g., Lamonica v. Safe Hurricane Shutters+2013 U.S. App. LEXIS 4599 (11th Cir. 2013)(ruling personal liability for FLSA violations can attach to any individual with control over an employer’s financial affairs who could potentially cause an employer to violate FLSA).

    As an alternative to private litigation, the FLSA empowers the WHD to supervise or if necessary, enforce through litigation the rights of workers against a breaching employer to recover back pay plus  liquidated damages in an amount equal to the wrongfully denied wages. WHD also can pursue injunctive relief against noncompliant employers.

    When the employer is a repeat offender or willfully violated the FLSA, additional consequences attach.  A violation is “willful” for purposes of FLSA criminal prosecution if it is deliberate, voluntary, and intentional. A fine of up to $10,000 on the first conviction

    When an employer’s violation of the FLSA is repetitious or willful, the FLSA empowers WHD to impose civil money penalties (CMPs) against the noncompliant employer in addition to the recovery of back pay and liquidated damages. Intended to discourage future noncompliance by an employer guilty of violating the FLSA, CMPs for a “repeated” violation are assessable when the employer had previously violated the minimum wage or overtime requirements of the FLSA. CMPs for a “willful” violation may be assessed when it can be shown that the employer knew that its conduct was prohibited by the FLSA or showed reckless disregard for the requirements of the FLSA.  CMPs ordinarily are imposed based on violations occurring within the normal two-year investigation period. Where violations are determined to be willful, the investigation will cover a three-year period.

    The applicable 2018 CMP amounts, which are adjusted annually for inflation, are as follows:

     

    Type of Violation Statutory Citation CFR Citation Maximum Civil Monetary Penalty on or before 1/2/2018 Maximum Civil Monetary Penalty on or after 1/3/2018
    Homeworker:

    Violation of recordkeeping, monetary, certificate or other statutes, regulations or employer assurances.

    29 USC 211(d) 29 CFR 530.302 $1,005 $1,026
    Child labor:

    (1) Violation of child labor standards (sec 212 or 213(c));

    29 USC 216(e)(1)(A)(i) 29 CFR 570.140(b)(1) and 29 CFR 579.1(a)(1)(i)(A) $12,278 $12,529
    (2) Violation of child labor standards (sec 212 or 213(c)) that causes the serious injury or death of a minor; 29 USC 216(e)(1)(A)(ii) 29 CFR 570.140(b)(2) and 29 CFR 579.1(a)(1)(i)(B) $55,808 $56,947
    (3) Willful or repeated violation of child labor standards (sec 212 or 213(c)) that causes the serious injury or death of a minor 29 USC 216(e)(1)(A)(ii) 29 CFR 570.140(b)(2) and 29 CFR 579.1(a)(1)(i)(B) $111,616 $113,894
    (4) Repeated or willful violation of section 206 or 207. 29 USC 216(e) 29 CFR 579.1(a)(2) $1,925 $1,964
    Minimum Wage and Overtime:

    Repeated or willful violation of section 206 or 207.

    29 USC 216(e)(2) 29 CFR 578.3(a) $1,925 $1,964

    Although typically reserved for more egregious violations, “willful” violations of the FLSA can trigger criminal prosecution by the Department of Justice. A fine of up to $10,000, or a term of imprisonment of up to six months, or both, on all convictions after the first conviction

    In addition to or instead of lawsuits by the Secretary of Labor for back wages or injunctive relief, willful violation of the FLSA also can trigger criminal prosecutions against an employer by the Department of Justice.  Criminal penalties for willful FLSA violations include a fine of up to $10,000, or a term of imprisonment of up to six months, or both, on all convictions after the first conviction.  Since enforcement actions by the DOJ can be brought instead of or in addition to lawsuits by WHD for back wages or injunctive relief, an employer that willfully violates the FLSA can be ordered to pay liquidated damages and back-pay, as well as any court imposed criminal fine or penalty.

    Always popular, WHD and private enforcement of the FLSA initially spiked upward following the highly publicized George W. Bush Administration’s implementation of updated FLSA “white collar” regulations regarding the classification of workers as exempt.  The Obama Administration’s highly publicized, but unsuccessful, campaign to increase the minimum wage and aggressive FLSA educational outreach and enforcement further fueled this trend.  While President Trump has opposed proposals to increase the federal minimum wage, he has expressed his commitment to protect workers’ FLSA rights through continued vigorous enforcement of the FLSA minimum wage, overtime and other rules.

    As a result of its aggressive enforcement commitments, WHD takes credit for having recovered more than $1.2 billion in back wages on behalf of more than 1.3 million workers over the past five years. See here.  The following WHD enforcement statistics reflect that its commitment to FLSA enforcement has continued during President Trump’s tenure in office.

    Cases with Violations Back Wages Employees Receiving Back Wages(duplicated 1)
    FY 2011 Minimum Wage 12,450 $29,327,527 89,305
    Overtime 11,990 $140,328,012 204,243
    FY 2012 Minimum Wage 12,532 $35,270,524 107,005
    Overtime 12,462 $148,560,700 218,137
    FY 2013 Minimum Wage 12,403 $38,470,100 103,671
    Overtime 12,108 $130,703,222 174,197
    FY 2014 Minimum Wage 11,042 $36,732,407 106,184
    Overtime 11,238 $136,239,001 174,365
    FY 2015 Minimum Wage 10,642 $37,828,554 86,229
    Overtime 10,496 $137,701,703 173,330
    FY 2016 Minimum Wage 10,722 $34,964,350 81,870
    Overtime 10,884 $171,917,225 209,819
    FY 2017 Minimum Wage 10,687 $31,213,737 69,588
    Overtime 10,823 $157,592,682 183,272

    New Pilot PAID Program May Offer New Option To Resolve WHD Exposures

    On March 6, 2018, the WHD division announced a new pilot self-audit Payroll Audit Independent Determination (PAID) program that for the next six months will allow employers accepted into the program after voluntarily disclosing violations to resolve their exposure WHD penalties and liquidated damages commonly assessed by WHD against employers for violating the FLSA minimum wage and overtime violations by:

    • Voluntarily disclosing the violations to WHD before becoming subject to investigation or enforcement and requesting admission to the program;
    • Paying affected workers 100 percent of the unpaid back pay due wrongfully denied by the end of the next full pay period after receiving the summary of unpaid wages from WHD confirming the back pay amount;
    • Working with WHD prospectively to correct noncompliant practices; and
    • Taking other actions to correct and prevent a recurrence of those violations.

    While participation in the PAID program allows a participating employer to settle its exposure to prosecution for those violations by WHD, many employers may face challenges in using the program as a result of the inability to marshal the required capital to pay 100 percent of the back pay due within the required time period.

    Beyond this challenge, employers evaluating whether to seek relief through the new PAID program also may need to weigh a variety of other concerns.

    For instance, employers considering participation need to understand that the settlement only addresses potential liability from WHD enforcement.  While WHD’s requirement that a participating employer pay affect 100 percent of any wrongfully denied back pay to the impacted employees generally would reduce the actual back pay damages recoverable by an employee in a private enforcement action, WHD says settlements reached with the WHD under the PAID program does not prevent employees wrongfully denied wages in violation of FSLA from bringing private lawsuits.  Rather, WHD states that it will be purely the employee’s choice whether to accept the payment of back wages the employer agrees to pay under the PAID program settlement. If the employee chooses to not accept the payment, the employee will not release any private right of action. Additionally, if the employee chooses to accept the payment, the employee will not grant a broad release of all potential claims under the FLSA. Rather, the releases are tailored to only the identified violations and time period for which the employer is paying the back wages. The WHD also cautions that regardless of whether the employee accepts or rejects the back pay specified in the PAID program, the FLSA will prohibit employers from retaliating against the employee for his or her choice. Furthermore, while the payment of previously unpaid amounts could reduce the amount of unpaid wages for purposes of determining liability for state wage and hour law violations, the WHD settlement does not directly impact or release liability for any state wage and hour violations.

    While any FLSA covered employer may use the program, interested employers should understand that acceptance into the program is not automatic and is not available for all FLSA violations.  Rather, the PAID program only covers potential violations of the FLSA’s overtime and minimum wage requirements that an employer self-identifies and voluntarily discloses and resolves in accordance with its PAID program settlement with WHD.  An employer cannot use the PAID program to resolve any issues for which WHD is already investigating the employer, or which the employer is already litigating in court, arbitration, or otherwise. An employer likewise may not initiate the process when an employee’s representative or counsel has already communicated an interest in litigating or settling the issue.   Employers using the Paid program also must be prepared to correct the noncompliant practices that resulted in the violations settled under the PAID program.  According to the WHD, WHD will not allow employers to use the program to repeatedly resolve the same violations, as this program is designed to identify and correct non-compliant practices. By allowing employers to participate in the PAID program, WHD also does not waive its right to conduct any future investigations of the employer.

    Employers contemplating participation in the PAID program generally should conduct a self-audit after updating their understanding of WHD program and compliance assistance materials and other WHD guidance.  Because the information, analysis and discussions conducted in this process may be legally sensitive, employers generally will want to engage qualified legal counsel before initiating these processes to advise and assist the employer about the adequacy and risks of its existing practices, recommendations for redressing known compliance issues and other risks as well as opportunities and procedures for qualifying certain of these actions and discussions for coverage under attorney-client privilege, attorney work product or other evidentiary protections.

    Whether or not an employer decides based on the audit to pursue compliance resolution through the PAID program, employers generally should work with their legal counsel within the scope of attorney client privilege to organize and retain documentation of their audit, its findings of compliance and, for any potential compliance issues, corrective actions taken to redress those issues retrospectively and prospectively, and other documentation that the employer might need to pursue resolution under the PAID program or otherwise respond to and defend against a WHD or private charges brought by an employee in the future.

    If the employer wishes to pursue resolution of potential violations under the PAID program based on review of the audit findings in conjunction with their legal counsel, the employer in coordination with the legal counsel within the scope of attorney client privilege should work together to prepare and assemble the records and information WHD will expect the employer to provide in the initial phases of the process including:

    • A list of the specific potential violations uncovered
    • The specific employees affected
    • The specific timeframes in which each employee was affected, and
    • The calculation of the amount of back wages the employer believes are owed to each employee.
    • Each of the calculations described above—accompanied by both evidence and explanation concerning how the calculations were made;
    • A concise explanation of the scope of the potential violations for possible inclusion in a release of liability;
    • A certification that the employer reviewed all of the information, terms, and compliance assistance materials;
    • A certification that the employer is not litigating the compensation practices at issue in court, arbitration, or otherwise, and likewise has not received any communications from an employee’s representative or counsel expressing interest in litigating or settling the same issues; and
    • A certification that the employer will adjust its practices to avoid the same potential violations in the future.

    After preparing this information, the employer generally will want to arrange for legal counsel to make the preliminary contact to the WHD to request that the WHD admit the employer to the PAID program.  During the preliminary contact, the WHD will require that a list of the specific potential violations, and the identity, specific time frame and back pay amount that employer believes it owes to each affected employee as a prerequisite to considering the request for admission to the program.  If the WHD approves the employer’s request, WHD will require that the employer or its legal counsel on its behalf provide the remaining information listed above.  After evaluating this information, WHD will provide notification of the next steps, including the collection of any other information necessary for WHD to assess and confirm the back wages due for the identified violations.

    Current published guidance states that after WHD assesses the back wages due, it will issue a summary of unpaid wages. WHD will also issue forms describing the settlement terms for each employee, which employees may sign to receive payment. The release of claims provided in the form will match the previously agreed-upon language and, again, must be limited to only the potential violations for which the employer had paid back wages. The PAID program settlement will require the employers to pay the back pay amounts confirmed in the summary of unpaid wages promptly and in full by the end of the next payroll period after receiving the WHD summary of wages confirming the back pay amounts required.

    Audit & Act To Mitigate FLSA & Other Wage & Hour Risks

    Regardless of whether an employer elects to pursue using the new PAID program, all FLSA covered employers generally should consult with legal counsel within the scope of attorney-client privilege to assess the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws, tighten contracting and other compliance oversight in relation to outsourced services, and about using the PAID program and other options to minimize their potential liability under applicable wages and hour laws.  Conducting this analysis within the scope of attorney-client privilege is important because the analysis and discussions are highly sensitive both as potential evidence for wage and hour and other legal purposes.  Consequently, businesses and their leaders generally will want to arrange for this work to be protected to the extent by attorney-client privilege, work product and other evidentiary protections against discovery by WHD, employees or others for FLSA or other workforce enforcement actions.

    As a part of this process, businesses and their leaders generally should plan to:

    • Review subcontractor, temporary, lease employee, independent contractor and other outsourced labor and services relationship for potential risk of worker reclassification and tighten contracting and other procedures;
    • Audit the position of each employee currently 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;
    • If the employer hires any individuals under age 18, audit and implement appropriate procedures to ensure its ability to demonstrate compliance with all applicable FLSA child labor rules;
    • If the employer is a government contractor or subcontractor or otherwise performs any services on projects funded with federal or state funds, evaluate the applicability and fulfillment of any special wage, fringe benefit, recordkeeping or other government contracting wage and hour requirements;
    • If the employer hires foreign agricultural or other workers subject to special conditions and requirements, to review compliance with those special requirements;
    • Review and tighten 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 employer uses leased, temporary, or other outsourced labor, evaluate contractual, process and other options to support the employer’s ability cost effectively to respond to an audit, investigation or enforcement action by WHD or private litigants and if necessary, obtain indemnification or other recovery in the event the employer incurs liability due to the use or practices of the outsourced labor supplier;
    • 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 and document all workers classified as exempt;
    • Review of existing documentation and record keeping practices for hourly employees;
    • Evaluate potential exposures under other employment, labor, tax or related laws or contracts that might be impacted by the findings or actions taken in response to those findings;
    • Explore available options and alternatives for calculating required wage payments to non-exempt employees and assessing and resolving other concerns;
    • Identify and calculate other employee benefit, tax or other corrections and associated costs and procedures that may be required as a result of findings or corrective actions resulting from their redress;
    • Re-engineer work rules, policies, contracts and practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures;
    • Explore insurance, indemnification and other options for mitigating risks and associated investigation and defense costs .
    • Pursue self-correction within the new PAID Program or otherwise.

    Cynthia Marcotte Stamer, is nationally and internationally recognized for her work assisting businesses, governments, and other entities to develop creative strategies for dealing with employee benefit and related human resources, insurance, health care and finance concerns. Ms. Stamer helps businesses design, administer and defend cost-effective employee benefit other human resources programs, policies and procedures to meet their budgetary and other business objectives.

     About The Author

    Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for management work, coaching, teachings, and publications.

    Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. Her day-to-day work encompasses both labor and employment issues, as well as independent contractor, outsourcing, employee leasing, management services and other nontraditional service relationships. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with all aspects for workforce and human resources management, including, recruitment, hiring, firing, compensation and benefits, promotion, discipline, compliance, trade secret and confidentiality, noncompetition, privacy and data security, safety, daily performance and operations management, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

    The author of the “Texas Payday Act,” and numerous other highly regarded publications on wage and hour and other human resources, employee benefits and compensation publications, Ms. Stamer is well-known for her 30 years of extensive wage and hour, compensation and other management advice and representation of restaurant and other hospitality, health, insurance, financial services, technology, energy, manufacturing, retail, governmental and other domestic and international businesses of all types and sizes.

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other concerns by her service as a management consultant,  business coach and consultant and policy strategist as well through her leadership participation in professional and civic organizations such her involvement as the Vice Chair of the North Texas Healthcare Compliance Association; Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Gulf Coast TEGE Council Exempt Organization Coordinator; a founding Board Member and past President of the Alliance for Healthcare Excellence; former board member and Vice President of the Managed Care Association; past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; a member and policy adviser to the National Physicians’ Council for Healthcare Policy; current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee; current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section; Past Chair of the ABA Health Law Section Managed Care & Insurance Section; ABA Real Property Probate and Trust (RPTE) Section former Employee Benefits Group Chair, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative, and Defined Contribution Committee Co-Chair, past Welfare Benefit Committee Chair and current Employee Benefits Group Fiduciary Responsibility Committee Co-Chair, Substantive and Group Committee member, Membership Committee member and RPTE Representative to the ABA Health Law Coordinating Council; past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former member of the Board of Directors, Treasurer, Member and Continuing Education Chair of the Southwest Benefits Association and others.

    Ms. Stamer also is a widely published author, highly popular lecturer, and serial symposia chair, who publishes and speaks extensively on human resources, labor and employment, employee benefits, compensation, occupational safety and health, and other leadership, performance, regulatory and operational risk management, public policy and community service concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications.

    Want to know more? See here for details about the author of this update, attorney Cynthia Marcotte Stamer, e-mail her here or telephone Ms. Stamer at (469) 767-8872.

    About Solutions Law Press, Inc.™

    Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here 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 your profile here.

    NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The presenter and the program sponsor disclaim, and have no responsibility to provide any update or otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

    Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department 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.

    ©2018 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™  For information about republication, please contact the author directly. All other rights reserved.

     


    Learn About Rising Group Health Plan Mental Health Mandate Risks From 6/27 “2017 Federal Group Health Plan Mental Health Rules Update”

    June 22, 2017

    Register Now To Participate In 

    “2017 Federal Group Health Plan Mental Health Rules Update

    Solutions Law Press, Inc™ Health Plan Update WebEx Briefing  

    Tuesday, June 27, 2017

    10:30 A.M.-11:30 P.M. Eastern | 11:30 A.M.-12:30 P.M. Central

    EXPANDING REGULATORY REQUIREMENTS & ENFORCEMENT SPELL TROUBLE FOR HEALTH PLANS AND THEIR SPONSORING EMPLOYERS.

    Solutions Law Press, Inc.™ invites employer and other group health plan sponsors, fiduciaries, insurers, administrative service providers, plan brokers and consultants are invited learn critical information about their expanding risks and responsibilities arising from existing and proposed changes to rules and enforcement of federal group health plan mental health and substance abuse (MH/SUB) coverage and privacy rules under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), as supplemented by the Patient Protection and Affordable Care Act (ACA) and the 21st Century Cures Act (Cures Act) and the Privacy Rules of the Health Insurance Portability & Accountability Act (HIPAA) conducted by attorney Cynthia Marcotte Stamer, a Fellow in the American College of Employee Benefits recognized as among the “Best Lawyers” in employee benefits for her health and other benefit knowledge, experience, policy advocacy and thought leadership.  Register here now!

    Tightening Health Plan Mental Health & Substance Abuse Rules & Enforcement Make Group Health Plan Compliance Critical

    New and proposed guidance jointly published June 16, 2017 by the Departments of Labor (DOL), Health & Human Services (HHS) and Treasury is the latest in a series of regulatory and enforcement developments over the past year alerting  group health plans and their employer and other group health plan sponsors, fiduciaries, insurers, administrative services providers, plan brokers and consultants involved in health plan design, funding, or administration to get serious about their group health plans’ compliance with the MHPAEA federal group health plan mental health and substance abuse coverage and benefit requirements, as supplemented by the ACA and the Cures Act without running afoul of the Privacy Rules of HIPAA.

    Building upon federal group health plan mental health parity mandates originally implemented under the Mental Health Parity Act, the MHPAEA generally requires that any financial requirements or treatment limitations group health plans impose on mental health and substance use disorder (MH/SUD) benefits not be restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical and surgical benefits. MHPAEA also imposes several disclosure requirements on group health plans and health insurance issuers.  Not satisfied with the MHPAEA coverage and disclosure protections, however, Congress subsequently broadened federal MH/SUD benefit rights under group health plans through the enactment of the ACA and the Cures Act.  Congress also has imposed special requirements and protections for mental health treatment records adds additional responsibilities for group health plans and their service providers when dealing with information and records in connection with the administration of MH/SUD benefits.

    After a long period of lax oversight and enforcement of these federal group health plan mental health rules, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) since October, 2016 have begun both tightening the rules and acting to increase oversight and enforcement.  The Departments have issued a series of joint guidance clarifying and broadening their interpretations of these MH/SUD benefit and disclosure mandates while simultaneously taking steps to increase awareness and enforcement of these rights.  As part of these ongoing efforts, Departments’ on June 16, 2017 expanded this guidance with their publication of new Mental Health Parity Implementation FAQs Part 38 discussing their joint interpretation of the broadening effect of the enactment of the ACA and the Cure Act on these plan requirements.  Concurrently, the Departments signaled their intention to add additional responsibilities for group health plans and insurers by publishing along with FAQ Part 38 a Draft MHPAEA Disclosure Template and request for comments.  This latest guidance package reaffirms that the Departments are continuing efforts to increase oversight of and enforcement of MH/SUD compliance against group health plans, their sponsors, fiduciaries, insurers, and their administrative and other service providers.  In the face of these developments and the reported initiation of enforcement actions by the Departments, the group health plans, their employer and other sponsors, fiduciaries, insurers, and their administrative and other service providers should move quickly to understand and update their plans and practices to comply with these recent developments while bracing for the likely need to deal with further expanded disclosure and other additional responsibilities under the MHPAEA jointly proposed by the Departments on June 16, 2017.

    Beyond fulfilling these expanding MHPAEA responsibilities, health plan fiduciaries, administrators, insurers and sponsors also must ensure their health plan and its business associates comply with  special rules concerning the protection, use and disclosure of mental health treatment records and information that may impact certain mental health treatment and other records received, used, retained or disclosed in the course of administering mental health, substance abuse or other provisions of their group health plans under the HIPAA Privacy Rules.  Keeping in mind that HHS audit and enforcement of compliance by health plans and other HIPAA covered entities with HIPAA’s medical privacy and data security rules, health plan sponsors, fiduciaries, insurers and administrative and other service providers also should take the opportunity to verify that their plans and practices comply with special HIPAA rules impacting authorizations and other dealings with certain mental health and substance abuse health information and records and other HIPAA medical privacy and security requirements.

    Given these developments, group health plans, their sponsors, fiduciaries, insurers and administrator must take steps to verify and maintain compliance with these federal MH/SUD requirements.  Ensuring proper compliance with these federal rules is particularly important to avoid triggering the substantial liability that health plans, their employer and other sponsors, insurers, and administrators can incur if their health plan violates these mandates.  Obviously, plans and their sponsors, insurers and fiduciaries can expect to pay additional plan expenses necessary to pay wrongfully denied benefits and other expenditures these plan or its fiduciaries expend to investigate, defend and resolve claims or compliance audits, investigations, litigation or actions brought by the Departments, state insurance regulators with respect to state governments or insurers, or private litigation by participants or beneficiaries.  Many employer or other plan sponsors may be unaware that these violations also generally expose employers and other health plan sponsors to liability to self identify, self-report on Internal Revenue Service Form 8928 and self-pay and excise tax of up to $100 per participant per day per uncorrected violation by the due date for filing of their annual corporate tax return.

    With oversight and enforcement already rising and the Departments proposing to expand further both disclosure duties and enforcement, group health plans, their employer and other sponsors, insurers, fiduciaries and administrators clearly need to take prompt action to verify their existing health plan provisions and administrative practices are up-to-date and administered to withstand challenge from the Departments, participants, beneficiaries, health care providers and others. Consequently, employer and other group health plan sponsors, fiduciaries, insurers, administrative services providers, plan brokers and consultants involved in health plan design, funding, or administration should act quickly to verify their plan terms and practices are updated to comply with existing rules and share their input in response to the Departments June 16, 2017 requests for comments.

    ABOUT CYNTHIA MARCOTTE STAMER

    Recognized as “Legal Leader™ Texas Top Rated Lawyer” in both Health Care Law and Labor and Employment Law, a “Texas Top Lawyer,” and an  “AV-Preeminent” and “Top Rated Lawyer” by Martindale-Hubble, singled out as among the “Best Lawyers In Dallas” in employee benefits by D Magazine; Cynthia Marcotte Stamer is a practicing attorney and management consultant, author, public policy advocate and lecturer widely recognized for her nearly 30 years’ of work and pragmatic thought leadership, publications and training on health coverage and health care, health plan and employee benefits, workforce and related regulatory and other compliance, performance management, risk management, product and process development, public policy, operations and other concerns.

    Throughout her legal and consulting career, Ms. Stamer has  drawn recognition for combining extensive knowledge and experience with her talents as an insightful innovator and problem solver when advising, representing and defending employer and other plan sponsors, insurers, fiduciaries, insurers, electronic and other technology, plan administrators and other service providers, governments and others about health coverage, benefit program design, funding, documentation, administration, data security and use, contracting, plan, public and regulatory reforms and enforcement, and other risk management and operations matters  as well as for her work and thought leadership on a broad range of other health,  employee benefits, human resources and other workforce, insurance, tax, compliance and other matters.  Her experience encompasses leading and supporting the development and defense of innovative new programs, practices and solutions; advising and representing clients on routine plan establishment, plan documentation and contract drafting and review, administration, change and other compliance and operations crisis prevention and response, compliance and risk management audits and investigations, enforcement actions and other dealings with the US Congress, Departments of Labor, Treasury, Health & Human Services, Federal Trade Commission, Justice, state legislatures, attorneys general, insurance, labor, worker’s compensation, and other agencies and regulators,  She also provides strategic and other supports clients in defending litigation as lead strategy counsel, special counsel and as an expert witness.

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares shared her thought leadership, experience and advocacy on these and other concerns by her service in the leadership of a broad range of other professional and civic organization including her involvement as Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE; Coalition on Patient Empowerment, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, Past Group Chair, current Defined Contribution Plan Committee Co-Chair, former Welfare Committee Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative and current RPTE Representative to the ABA Health Law Coordinating Counsel, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, former member of the Board of Directors of the Southwest Benefits Association and others.

    Ms. Stamer also is a highly popular lecturer, symposia chair and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, the Society of Professional Benefits Administrators, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications.  She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients, serves on the faculty and planning committee of many workshops, seminars, and symposia, and on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. For additional information about Ms. Stamer, see CynthiaStamer.com or contact Ms. Stamer via email to here or via telephone to (469) 767-8872.

    About Solutions Law Press

    Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources at www.SolutionsLawPress.com.

    If you or someone else you know would like to receive future updates and notices about other upcoming Solutions Law Press™ events, 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 concerning this communication, see here.

    NOTICE:  Any party accessing or using any content obtained from or through Solutions Law Press, Inc.™ acknowledges and agrees that any and all programs, publications, statements and materials presented or published by Solutions Law Press, Inc.™ and any statements or other contents made or contained therein are for general informational and educational purposes only. They are generic in nature and not tailored or intended to be relied upon by any person, business, entity or other party for purposes for determining the legal, financial or other appropriateness, defensibility, suitability, outcome or consequences of any strategy, action, course of action, or any other facts, circumstances, event or conduct.  Users of these resources are responsible at all times for independently evluating the suitability of any content, materials, tools or other materials or information accessed from or through Solutions Law Press, Inc. directly or indirectly.

    Solutions Law Press, Inc.™ and its authors and contributors do not represent or warrant in any form or manner, and expressly disclaim and deny the appropriateness of the use or reliance of any person or entity on any content, tools or resources accessed or obtained from or through Solutions Law Press, Inc.™ for any general or particular use or purpose by any party under any circumstances.

    Likewise, they do not establish an attorney-client relationship or other fiduciary, contractual or other relationship between Solutions Law Press, Inc. and/or any of its authors or contributors and any other party.  They are not, and do not serve as a substitute for legal, accounting, tax or other advice.  They don’t create or otherwise give rise to any duty, obligation, responsibility on behalf of Solutions Law Press, Inc™ or any provider or offeree of content, tools or services to any party.

    Parties accessing or using any of Solutions Law Press, Inc.™  competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The publisher and the author expressly disclaim all liability for this content and any responsibility to provide any update or otherwise notify anyone of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

    ©2017 Solutions Law Press. All rights reserved.


     

     

     

     

     

     

     


    Latest $2.5M HIPAA Settlement Warning To Health Plans, Providers: Get HIPAA Compliant

    April 26, 2017

    A new Department of Health and Human Services Office of Civil Rights (OCR) CardioNet Resolution Agreement and Corrective Action Plan  (Resolution Agreement) settling OCR charges of violations of the Privacy and Security Rules of the Health Insurance Portability & Accountability Act against remote cardiac monitoring provider CardioNet provides important lessons for all health plans, health insurers, telemedicine and other healthcare providers, healthcare clearinghouses (Covered Entities) and their business associates about steps to take to reduce their risk of getting hit with big OCR penalty like the $2.5 million settlement payment CardioNet must pay under the Resolution Agreement.

    OCR announced the first OCR HIPAA settlement involving a wireless health services provider Monday, April 24.  Under the Resolution Agreement, CardioNet agrees to pay OCR $2.5 million and to implement a corrective action plan to settle potential OCR charges it violated the HIPAA Privacy and Security Rules based on the impermissible disclosure of unsecured electronic protected health information (ePHI).

    CardioNet Charges & Settlement

    As has become increasingly common in recent years, the CardioNet settlement arose from concerns initially brought to OCR’s attention in connection with a HIPAA breach notification report.  On January 10, 2012, OCR received notification from the provider of remote mobile monitoring of and rapid response to patients at risk for cardiac arrhythmias that a workforce member’s laptop with the ePHI of 1,391 individuals was stolen from a parked vehicle outside of the employee’s home. CardioNet subsequently notified OCR of a second breach of ePHI 2,219 individuals, respectively.

    Likewise, the HIPAA breaches uncovered by OCR in the course of investigating these CardioNet breaches occur in the operations of many other covered entities.  According to the OCR’s investigation in response to these breach reports revealed a series of continuing compliance concerns, including:

    • CardioNet failed to conduct an accurate and thorough risk analysis to assess the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI and failed to plan for and implement security measures sufficient to reduce those risks and vulnerabilities;
    • CardioNet’s policies and procedures implementing the standards of the HIPAA Security Rule were in draft form and had not been implemented;
    • CardioNet was unable to produce any final policies or procedures regarding the implementation of safeguards for ePHI, including those for mobile devices;
    • CardioNet failed to implement policies and procedures that govern the receipt and removal of hardware and electronic media that contain electronic protected health information into and out of its facilities, the encryption of such media, and the movement of these items within its facilities until March 2015; and
    • CardioNet failed to safeguard against the impermissible disclosure of protected health information by its employees, thereby permitting access to that information by an unauthorized individual, and failed to take sufficient steps to immediately correct the disclosure.

    To resolve these OCR charges, CardioNet agrees in the Resolution Agreement to pay $2.5 million to OCR and implement a corrective action plan.  Among other things, the corrective action plan requires CardioNet to complete the following actions to the satisfaction of OCR:

    • Prepare a current, comprehensive and thorough Risk Analysis of security risks and vulnerabilities that incorporates its current facility or facilities and the electronic equipment, data systems, and applications controlled, currently administered or owned by CardioNet, that contain, store, transmit, or receive electronic protected health information (“ePHI”) and update that Risk Analysis annually or more frequently, if appropriate in response to environmental or operational changes affecting the security of ePHI.
    • Assess whether its existing security measures are sufficient to protect its ePHI and revise its Risk Management Plan, Policies and Procedures, and training materials and implement additional security measures, as needed.
    • Develop and implement an organization-wide Risk Management Plan to address and mitigate any security risks and vulnerabilities found in the Risk Analysis as required by the Risk Management Plan.
    • Review and, to the extent necessary, revise, its current Security Rule Policies and Procedures (“Policies and Procedures”) based on the findings of the Risk Analysis and the implementation of the Risk Management Plan to comply with the HIPAA Security Rule.
    • Provide certification to OCR that all laptops, flashdrives, SD cards, and other portable media devices are encrypted, together with a description of the encryption methods used (“Certification”).
    • Review, revise its HIPAA Security training to include a focus on security, encryption, and handling of mobile devices and out-of-office transmissions and other policies and practices require to address the issues identified in the Risk Assessment and otherwise comply with the Risk Management Plan and HIPAA train its workforce on these policies and practices.
    • Investigate all potential violations of its HIPAA policies and procedures and notify OCR in writing within 30 days of any violation.
    • Submit annual reports to OCR, which must be signed by an owner or officer of CardioNet attesting that he or she has reviewed the annual report, has made a reasonable inquiry regarding its content and believes that, upon such inquiry, the information is accurate and truthful.
    • Maintain for inspection and copying, and provide to OCR, upon request, all documents and records relating to compliance with the corrective action plan for six years.

    Implications For Covered Entities & Business Associates

    The latest in a rapidly-growing list of high dollar HIPAA enforcement actions by OCR, the CardioNet Resolution Agreement contains numerous lessons for other Covered entities and their business associates about the importance of appropriate HIPAA privacy and security compliance, including but not limited to the following:

    • Like many previous resolution agreements announced by OCR, the Resolution Agreement reiterates the responsibility of covered entities and business associates to properly secure their ePHI and that as part of this process, OCR expects all laptop computers and other mobile devices containing or with access to ePHI be properly encrypted and secured.
    • It also reminds covered entities and their business associates to be prepared for, and expect an audit from OCR when OCR receives a report that their organization experienced a large breach of unsecured ePHI.
    • The Resolution Agreement’s highlighting of the draft status of CardioNet’s privacy and security policies also reflects OCR expects covered entities  to actually final policies, procedures and training in place for maintaining compliance with HIPAA.
    • The discussion and requirements in the Corrective Action Plan relating to requirements to conduct comprehensive risk assessments at least annually and in response to other events, and to update policies and procedures in response to findings of these risk assessments also drives home the importance of conducting timely, documented risk analyses of the security of their ePHI, taking prompt action to address known risks and periodically updating the risk assessment and the associated privacy and security policies and procedures in response to the findings of the risk assessment and other changing events.
    • The requirement in the Resolution Agreement of leadership attestation and certification on the required annual report reflects OCR’s expectation that leadership within covered entities and business associates will make HIPAA compliance a priority and will take appropriate action to oversee compliance.
    • Finally, the $2.5 million settlement payment required by the Resolution Agreement and its implementation against CardioNet makes clear that OCR remains serious about HIPAA enforcement.

    Clearly, covered entities, business associates and their management should take steps to promptly review the adequacy of their organizations’ HIPAA compliance policies, practices and documentation in light of the deficiencies listed in the CardioNet and other HIPAA OCR settlements and civil monetary penalty assessments.  See e.g., Latest HIPAA Resolution Agreement Drives Home Importance Of Maintaining Current, Signed Business Associate Agreements$400K HIPAA Penalty Teaches Risk Assessment Importance$3.2 Children’s HIPAA CMP Teaches Key Lessons.

    Of course, covered entities and business associates need to keep in mind that acts, omissions and events that create HIPAA liability risks also carry many other potential legal and business risks.  For instance, since PHI records and data involved in such breaches usually incorporates Social Security Numbers, credit card or other debt or payment records or other personal consumer information, and other legally sensitive data, covered entities and business associates generally also may face investigation, notification and other responsibilities and liabilities under confidentiality, privacy or data security rules of the Fair and Accurate Credit Transaction Act (FACTA), the Internal Revenue Code, the Social Security Act, state identity theft, data security, medical confidentiality, privacy and ethics, insurance, consumer privacy, common law or other state privacy claims and a host of other federal or state laws.  Depending on the nature of the covered entity or its business associates, the breach or other privacy event also may trigger fiduciary liability exposures for health plan fiduciaries in the case of a health plan, professional ethics or licensing investigations or actions against health care providers, insurance companies, administrative service providers or brokers, shareholder or other investor actions, employment or vendor termination or disputes and a host of other indirect legal consequences.

    Beyond, and regardless of if, a covered entity or business ultimately succeeds in defending its  actions against a charge of violating any of these or other standards, however, covered entities, business associates and their leaders should keep in mind that the most material and often most intractable consequences of a HIPAA or other data or other privacy breach report or public accusation, investigation, admission also typically are the most inevitable:

    • The intangible, but critical loss of trust and reputation covered entities and business associates inevitably incur among their patients, participants, business partners, investors and the community; and
    • The substantial financial expenses and administrative and operational disruptions of investigating, defending the actions of the organization and implementation of post-event corrective actions following a data or other privacy breach, audit, investigation, or charge.

    In light of these risks, covered entities business associates and their management should use the experiences of CardioNet and other covered entities or business associates caught violating HIPAA or other privacy and security standards to reduce their HIPAA and other privacy and data security exposures.   Management of covered entities and their business associates should take steps to ensure that their organizations policies, practices and procedures currently are up-to-date, appropriately administered and monitored, and properly documented.  Management should ensure that their organizations carefully evaluate and strengthen as necessary their current HIPAA risk assessments, policies, practices, record keeping and retention and training in light of these and other reports as they are announced in a well-documented manner.  The focus of these activities should be both to maintain compliance and position their organizations efficiently and effectively to respond to and defend their actions against a data breach, investigation, audit or accusation of a HIPAA or other privacy or security rule violation with a minimum of liability, cost and reputational and operational damages.

    As the conduct of these activities generally will involve the collection and analysis of legally sensitive matters, most covered entities and business associates will want to involve legal counsel experienced with these matters and utilize appropriate procedures to be able to use and assert attorney-client privilege and other evidentiary privileges to mitigate risks associated with these processes.  To help plan for and mitigate foreseeable expenses of investigating, responding to or mitigating a known, suspected or asserted breech or other privacy event, most covered entities and business associates also will want to consider the advisability of tightening privacy and data security standards, notification, cooperation and indemnification protections in contracts between covered entities and business associates, acquiring or expanding data breach or other liability coverage, or other options for mitigating the financial costs of responding to a breach notification, investigation or enforcement action.

    About The Author

    Recognized by LexisNexis® Martindale-Hubbell® as a “AV-Preeminent” (Top 1%/ the highest) and “Top Rated Lawyer,” with special recognition as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Health Care,” “Labor & Employment,” “Tax: Erisa & Employee Benefits” and “Business and Commercial Law” by D Magazine, the author of this update is widely known for her 29 plus years’ of work in health care, health benefit, health policy and regulatory affairs and other health industry concerns as a practicing attorney and management consultant, thought leader, author, public policy advocate and lecturer.

    Throughout her adult life and nearly 30-year legal career, Ms. Stamer’s legal, management and governmental affairs work has focused on helping health industry, health benefit and other organizations and their management use the law, performance and risk management tools and process to manage people, performance, quality, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer supports these organizations and their leaders on both a real-time, “on demand” basis as well as outsourced operations or special counsel on an interim, special project, or ongoing basis with strategic planning and product and services development and innovation; workforce and operations management, crisis preparedness and response as well as to prevent, stabilize and cleanup legal and operational crises large and small that arise in the course of operations.

    As a core component of her work, Ms. Stamer has worked extensively throughout her career with health care providers, health plans and insurers, managed care organizations, health care clearinghouses, their business associates, employers, banks and other financial institutions, management services organizations, professional associations, medical staffs, accreditation agencies, auditors, technology and other vendors and service providers, and others on legal and operational compliance, risk management and compliance, public policies and regulatory affairs, contracting, payer-provider, provider-provider, vendor, patient, governmental and community relations and matters including extensive involvement advising, representing and defending public and private hospitals and health care systems; physicians, physician organizations and medical staffs; specialty clinics and pharmacies; skilled nursing, home health, rehabilitation and other health care providers and facilities; medical staff, accreditation, peer review and quality committees and organizations; billing and management services organizations; consultants; investors; technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, insurers, self-insured health plans and other payers; and other health industry clients to manage and defend compliance, public policy, regulatory, staffing and other operations and risk management concerns. A core focus of this work includes work to establish and administer compliance and risk management policies; comply with requirements, investigate and respond to Board of Medicine, Health, Nursing, Pharmacy, Chiropractic, and other licensing agencies, Department of Aging & Disability, FDA, Drug Enforcement Agency, OCR Privacy and Civil Rights, Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; dealings with JCHO and other accreditation and quality organizations; investigation and defense of private litigation and other federal and state health care industry investigations and enforcement; insurance or other liability management and allocation; process and product development; managed care, physician and other staffing, business associate and other contracting; evaluation, commenting or seeking modification of regulatory guidance, and other regulatory and public policy advocacy; training and discipline; and a host of other related concerns for public and private health care providers, health insurers, health plans, technology and other vendors, employers, and others.

    In the course of this work, Ms. Stamer has accumulated extensive experience helping health industry clients manage workforce, medical staff, vendors and suppliers, medical billing, reimbursement, claims and other provider-payer relations, business partners, and their recruitment, performance, discipline, compliance, safety, compensation, benefits, and training, board, medical staff and other governance; compliance and internal controls; strategic planning, process and quality improvement; change management; assess, deter, investigate and address staffing, quality, compliance and other performance; meaningful use, EMR, HIPAA and other data security and breach and other health IT and data; crisis preparedness and response; internal, government and third-party reporting, audits, investigations and enforcement; government affairs and public policy; and other compliance and risk management, government and regulatory affairs and operations concerns.

    Author of leading works on HIPAA and other privacy and data security works and the scribe leading the American Bar Association Joint Committee on Employee Benefits Annual Agency Meeting with OCR, her experience includes extensive compliance, risk management and data breach and other crisis event investigation, response and remediation under HIPAA and other data security, privacy and breach laws.  Heavily involved in health care and health information technology, data and related process and systems development, policy and operations innovation and a Scribe for ABA JCEB annual agency meeting with OCR for many years who has authored numerous highly regarded works and training programs on HIPAA and other data security, privacy and use, Ms. Stamer also is widely recognized for her extensive work and leadership on leading edge health care and benefit policy and operational issues including meaningful use and EMR, billing and reimbursement, quality measurement and reimbursement, HIPAA, FACTA, PCI, trade secret, physician and other medical confidentiality and privacy, federal and state data security and data breach and other information privacy and data security rules and many other concerns.

    In connection with this work, Ms. Stamer has worked extensively with health care providers, health plans, health care clearinghouses, their business associates, employers and other plan sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA, FACTA, trade secret and other information privacy and data security rules, including the establishment, documentation, implementation, audit and enforcement of policies, procedures, systems and safeguards, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and enforcement, and a host of other related concerns. Her clients include public and private health care providers, health insurers, health plans, technology and other vendors, and others.

    Her work includes both regulatory and public policy advocacy and thought leadership, as well as advising and representing a broad range of health industry and other clients about policy design, drafting, administration, business associate and other contracting, risk assessments, audits and other risk prevention and mitigation, investigation, reporting, mitigation and resolution of known or suspected violations or other incidents and responding to and defending investigations or other actions by plaintiffs, DOJ, OCR, FTC, state attorneys’ general and other federal or state agencies, other business partners, patients and others.

    In addition to representing and advising these organizations, she also has conducted training on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, MGMA, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

    A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in Pensions, healthcare, workforce, immigration, tax, education and other areas.

    The American Bar Association (ABA) International Section Life Sciences Committee Vice Chair, a Scribe for the ABA Joint Committee on Employee Benefits (JCEB) Annual OCR Agency Meeting, former Vice President of the North Texas Health Care Compliance Professionals Association, past Chair of the ABA Health Law Section Managed Care & Insurance Section, past ABA JCEB Council Representative, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has worked closely with a diverse range of physicians, hospitals and healthcare systems, DME, Pharma, clinics, health care providers, managed care, insurance and other health care payers, quality assurance, credentialing, technical, research, public and private social and community organizations, and other health industry organizations and their management deal with governance; credentialing, patient relations and care; staffing, peer review, human resources and workforce performance management; outsourcing; internal controls and regulatory compliance; billing and reimbursement; physician, employment, vendor, managed care, government and other contracting; business transactions; grants; tax-exemption and not-for-profit; licensure and accreditation; vendor selection and management; privacy and data security; training; risk and change management; regulatory affairs and public policy and other concerns.

    Past Chair of the ABA Managed Care & Insurance Interest Group and, a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also has extensive health care reimbursement and insurance experience advising and defending health care providers, payers, and others about Medicare, Medicaid, Medicare and Medicaid Advantage, Tri-Care, self-insured group, association, individual and group and other health benefit programs and coverages including but not limited to advising public and private payers about coverage and program design and documentation, advising and defending providers, payers and systems and billing services entities about systems and process design, audits, and other processes; provider credentialing, and contracting; providers and payer billing, reimbursement, claims audits, denials and appeals, coverage coordination, reporting, direct contracting, False Claims Act, Medicare & Medicaid, ERISA, state Prompt Pay, out-of-network and other “nonpar,” insured, and other health care claims, prepayment, post-payment and other coverage, claims denials, appeals, billing and fraud investigations and actions and other reimbursement and payment related investigation, enforcement, litigation and actions.

    A popular lecturer and widely published author on health industry concerns, Ms. Stamer continuously advises health industry clients about compliance and internal controls, workforce and medical staff performance, quality, governance, reimbursement, privacy and data security, and other risk management and operational matters. Ms. Stamer also publishes and speaks extensively on health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns.

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; an ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

    Ms. Stamer also is a highly popular lecturer, symposium and chair, faculty member and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management. Examples of her many highly regarded publications on these matters include “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security: Beyond HIPAA,” as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, Insurance Thought Leadership and many other prominent publications and speaks and conducts training for a broad range of professional organizations.

    For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (469) 767-8872 or via e-mail here.

    About Solutions Law Press, Inc.™

    Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here.

    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 your profile here.

    ©2017 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ All other rights reserved. For information about republication or other use, please contact Ms. Stamer here.


    Latest HIPAA Resolution Agreement Drives Home Importance Of Maintaining Current, Signed Business Associate Agreements

    April 24, 2017

    Health plans, their fiduciaries and sponsors, health insurers, health care providers, health care clearinghouses (“covered entities”) and their business associates must get and keep your business associate (BA) agreements (BAAs) in place, up-to-date, and readily available for inspection in accordance with the Health Insurance Portability & Accountability Act (HIPAA) Privacy Rule, 45 C.F.R. Part 160 and Subparts A and E of Part 164 (Privacy Rule).  That’s the clear message to covered entities and their business associates in the April 17, 2017 HIPAA Resolution Agreement just announced by the Department of Health & Human Services (HHS) Office of Civil Rights (OCR) with the Center for Children’s Digestive Health (CCDH).

    While the Resolution Agreement relates to breaches of the BAA requirements of a small pediatric practice, all health plans, health care providers and other covered entities and business associates should focus on the adequacy of their BAAs  and their BAA record keeping.  HIPAA compliance surveys reflect deficiencies with the BAA rules are common throughout the industry.  These findings and the involvement of BAs in data breaches or other OCR enforcement activities suggest a high probability that many other covered entities and business associates may be sitting ducks for similar sanctions.  See e.g., HIPAA Compliance Survey Churns Up Many Business Associate Problems (January 3, 2017).  Consequently, all covered entities and business associates generally should treat the CCDH Resolution Agreement as a message to review and correct as necessary their organizations’ compliance and recordkeeping to minimize their exposure to potential sanctions from violations of the HIPAA business associate rules.

    The HIPAA Business Associate Agreement Requirements

    OCR’s announcement of the CCDH Resolution Agreement is the latest in a growing series of HIPAA enforcement actions showing the growing risk covered entities and their business associates face for failing to take appropriate steps to comply with the BAA and other Privacy Rule requirements of HIPAA.

    As compliance audits and surveys of covered entities and business associates suggest a high level of noncompliance with the business associate agreement requirements among covered entities and business associates, While the ever-growing list of Resolution Agreements and Civil Monetary Penalties announced by OCR cover a variety of categories of HIPAA violations, the CCDH Resolution Agreement highlights the importance of covered entities and their business associates ensuring that before the BA creates, accesses, receives, discloses, retains or destroys any PHI for the covered entity,  a BAA meeting the Privacy Rule requirements is signed and retained for at least the six-year period the Privacy Rule requires in a manner easily producible when and if OCR or another agency asks for a copy as part of an investigation or other compliance audit.  See Privacy Rule §§ 164.502(e), 164.504(e), 164.532(d) and (e).

    The Privacy Rule requires that covered entities and business associates enter into a written and signed business associate agreement that contains the elements specified in Privacy Rule § 164.504(e) before the business associate creates, uses, accesses or discloses PHI of the covered entity. Meanwhile, the Privacy Rule recordkeeping requirements require that covered entities and BAs maintain copies of these BAAs for a minimum of six years.

    Violations of the Privacy Rule can carry stiff civil or even criminal penalties  Pursuant to amendments to HIPAA enacted as part of the HITECH Act, civil penalties typically do not apply to violations punished under the criminal penalty rules of HIPAA set forth in Social Security Act , 42 U.S.C § 1320d-6 (Section 1177).

    Under Section 1177, the criminal enforcement provisions of HIPAA authorize the Justice Department to prosecute a person who knowingly in violation of the Privacy Rule (1) uses or causes to be used a unique health identifier; (2) obtains individually identifiable health information relating to an individual; or (3) discloses individually identifiable health information to another person, punishable by the following criminal sanctions and penalties:

    • A fine of up to $50,000, imprisoned not more than 1 year, or both;
    • If the offense is committed under false pretenses, a fine of up to $100,000, imprisonment of not more than 5 years, or both; and
    • If the offense is committed with intent to sell, transfer, or use individually identifiable health information for commercial advantage, personal gain, or malicious harm, a fine of up to $250,000, imprisoned not more than 10 years, or both.

    In contrast, as amended by the HITECH Act, the civil enforcement provisions of HIPAA empower OCR to impose Civil Monetary Penalties on both covered entities and BAs for violations of any of the requirements of the Privacy or Security Rules.  The penalty ranges for civil violations depends upon the circumstances associated with the violations and are subject to upward adjustment for inflation.  As most recently adjusted here effective September 6, 2016,  the following currently are the progressively increasing Civil Monetary Penalty tiers:

    • A minimum penalty of $100 and a maximum penalty of $50,000 per violation, for violations which the CE or BA “did not know, and by exercising reasonable diligence would not have known” about using “the business care and prudence expected from a person seeking to satisfy a legal requirement under similar circumstances;”
    • A minimum penalty of $1,000 and a maximum penalty of $50,000 per violation, for violations for “reasonable cause” which do not rise to the level of “willful neglect” where “reasonable cause” means the “circumstances that would make it unreasonable for the covered entity, despite the exercise of ordinary business care and prudence, to comply with the violated Privacy Rule requirement;”
    • A minimum penalty of $10,000 and a maximum penalty of $50,000 per violation, for violations attributed to “willful neglect,” defined as “the conscious, intentional failure or reckless indifference to the obligation to comply” with the requirement or prohibition; and
    • A minimum penalty of $50,000 and a maximum penalty of $1.5 million per violation, for violations attributed to “willful neglect” not remedied within 30 days of the date that the covered entity or BA knew or should have known of the violation.

    For continuing violations such as failing to implement a required BAA, OCR can treat each day  of noncompliance as a separate violation.  However, sanctions under each of these tiers generally are subject to a maximum penalty of $1,500,000 for violations of identical requirements or prohibitions during a calendar year.  For violations such as the failure to implement and maintain a required BAA where more than one covered entity bears responsibility for the violation, OCR an impose Civil Monetary Penalties against each culpable party. OCR considers a variety of mitigating and aggravating facts and circumstances when arriving at the amount of the penalty within each of these applicable tiers to impose.

    While criminal enforcement of HIPAA remains relatively rare, a review of the OCR enforcement record in recent years makes clear that civil enforcement of HIPAA and the sanctions imposed is growing. See e.g.,  $400K HIPAA Settlement Shows Need To Conduct Timely & Appropriate Risk Assessments$5.5M Memorial HIPAA Resolution Agreement Shows Need To Audit.  For more examples, also see here.

    CCDH Sanctions For Violation Of HIPAA Business Associate Agreement Rules

    The CCDH Resolution Agreement arises from violations of this requirement that OCR says it discovered as a result of a compliance review conducted in response to an OCR investigation of a CCDH business associate, FileFax, Inc.  According to OCR, OCR found from the compliance review of CCDH triggered by OCR’s investigation of FileFax that while CCDH began disclosing PHI to Filefax in 2003 and that Filefax stored records containing protected health information (PHI) for CCDH, neither CCDH nor Filefax could produce a signed Business Associate Agreement (BAA) covering their relationship for any period before October 12, 2015.

    Based on the resulting investigation,  OCR concluded:

    • CCDH failed to obtain a BAA providing written assurances from Filefax that it would appropriately safeguard the PHI in Filefax’s possession or control satisfactory assurances as required by Privacy Rule §164.502(e); and
    • Because CCDH failed to secure the required BAA, it violated the Privacy Rule by impermissibly disclosing the PHI of at least 10,728 individuals to Filefax when CCDH transferred the PHI to Filefax without obtaining the requisite BAA from Filefax (Covered Conduct).

    In the Resolution Agreement, CCDH agrees to pay HHS $31,000.00 (Resolution Amount) and enter into and comply with a Corrective Action Plan (CAP) in return for OCR’s release of CCDH from liability for “any actions it may have against CCDH under the HIPAA Rules” for the Covered Conduct.  The Resolution Agreement only settles the civil monetary penalty and other OCR enforcement liabilities of CCDH with respect to the Covered Conduct.  Its provisions expressly state the Resolution Agreement does not affect any exposures of CCDH to CCDH to OCR civil monetary penalties or other enforcement for any HIPAA violations other than the Covered Conduct.

    Perhaps even more noteworthy given the HITECH Act’s provisions coordinating the civil and criminal sanctions of HIPAA, while  the Resolution Agreement provides no clear indication that the Justice Department might be considering criminally prosecuting CCDH or any other party in relation to the Covered Conduct, the Resolution Agreement also expressly states that its provisions do not affect CCDH’s potential exposure, if any, to criminal prosecution by the Justice Department for a criminal violation of the Privacy Rules under Section 1177 of the Social Security Act.

    Implications For Covered Entities & Business Associates

    Covered entities and their business associates should heed the CCDH Resolution Agreement as a strong message from OCR to ensure their organizations are complying with HIPAA’s BAA and other requirements.  The Resolution Agreement makes clear that the starting point of this compliance effort must be obtaining and maintaining the requisite BAAs for each BA relationship.

    To position their organizations to withstand potential investigation by OCR, covered entities and BAs should start by conducting a well-documented audit within the scope of attorney-client privilege both to verify that an appropriate, signed BAA is in place for each BA relationship as well as adequacy of processes for identifying business associate relationships, ensuring that signed BAAs are in effect before BAs access any PHI, and for investigating, reporting and resolving any breaches of the HIPAA Privacy or Security Rules that may arise in the course of operations.

    Conducting this audit as soon as possible is particularly important in light of reported findings of widespread compliance concerns. See HIPAA Compliance Survey Churns Up Many Business Associate Problems (January 3, 2017).  As the audit process could identify potential violations or other legally sensitive concerns,  covered entities and business associates generally will want to arrange for this audit and evaluation to be conducted under the supervision of legal counsel experienced with HIPAA within or pursuant to processes structured with the assistance of legal counsel within the scope of attorney-client privilege.

    Beyond confirming all necessary BAAs are in place, covered entities and business associates also generally will want to evaluate the adequacy of BAs’ processes and procedures for maintaining compliance with the Privacy and Security Rules as well as processes and procedures for responding to audits, investigations and complaints, reporting and addressing breaches of electronic and other PHI and other possible compliance concerns under HIPAA and other related laws.  In many instances, parties may n wish to revise and strengthen existing BAAs to more specifically define these policies and procedures more specifically as well as indemnification, cyber or other liability coverage requirements and other contractual provisions for allocating potential costs and liabilities arising from breaches, audits, investigations and other expenses associated with the administration of these provisions.

    About The Author

    Recognized by LexisNexis® Martindale-Hubbell® as a “AV-Preeminent” (Top 1%/ the highest) and “Top Rated Lawyer,” with special recognition as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Health Care,” “Labor & Employment,” “Tax: Erisa & Employee Benefits” and “Business and Commercial Law” by D Magazine, the author of this update is widely known for her 29 plus years’ of work in health care, health benefit, health policy and regulatory affairs and other health industry concerns as a practicing attorney and management consultant, thought leader, author, public policy advocate and lecturer.

    Throughout her adult life and nearly 30-year legal career, Ms. Stamer’s legal, management and governmental affairs work has focused on helping health industry, health benefit and other organizations and their management use the law, performance and risk management tools and process to manage people, performance, quality, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer supports these organizations and their leaders on both a real-time, “on demand” basis as well as outsourced operations or special counsel on an interim, special project, or ongoing basis with strategic planning and product and services development and innovation; workforce and operations management, crisis preparedness and response as well as to prevent, stabilize and cleanup legal and operational crises large and small that arise in the course of operations.

    As a core component of her work, Ms. Stamer has worked extensively throughout her career with health care providers, health plans and insurers, managed care organizations, health care clearinghouses, their business associates, employers, banks and other financial institutions, management services organizations, professional associations, medical staffs, accreditation agencies, auditors, technology and other vendors and service providers, and others on legal and operational compliance, risk management and compliance, public policies and regulatory affairs, contracting, payer-provider, provider-provider, vendor, patient, governmental and community relations and matters including extensive involvement advising, representing and defending public and private hospitals and health care systems; physicians, physician organizations and medical staffs; specialty clinics and pharmacies; skilled nursing, home health, rehabilitation and other health care providers and facilities; medical staff, accreditation, peer review and quality committees and organizations; billing and management services organizations; consultants; investors; technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, insurers, self-insured health plans and other payers; and other health industry clients to manage and defend compliance, public policy, regulatory, staffing and other operations and risk management concerns. A core focus of this work includes work to establish and administer compliance and risk management policies; comply with requirements, investigate and respond to Board of Medicine, Health, Nursing, Pharmacy, Chiropractic, and other licensing agencies, Department of Aging & Disability, FDA, Drug Enforcement Agency, OCR Privacy and Civil Rights, Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; dealings with JCHO and other accreditation and quality organizations; investigation and defense of private litigation and other federal and state health care industry investigations and enforcement; insurance or other liability management and allocation; process and product development; managed care, physician and other staffing, business associate and other contracting; evaluation, commenting or seeking modification of regulatory guidance, and other regulatory and public policy advocacy; training and discipline; and a host of other related concerns for public and private health care providers, health insurers, health plans, technology and other vendors, employers, and others.

    In the course of this work, Ms. Stamer has accumulated extensive experience helping health industry clients manage workforce, medical staff, vendors and suppliers, medical billing, reimbursement, claims and other provider-payer relations, business partners, and their recruitment, performance, discipline, compliance, safety, compensation, benefits, and training, board, medical staff and other governance; compliance and internal controls; strategic planning, process and quality improvement; change management; assess, deter, investigate and address staffing, quality, compliance and other performance; meaningful use, EMR, HIPAA and other data security and breach and other health IT and data; crisis preparedness and response; internal, government and third-party reporting, audits, investigations and enforcement; government affairs and public policy; and other compliance and risk management, government and regulatory affairs and operations concerns.

    Author of leading works on HIPAA and other privacy and data security works and the scribe leading the American Bar Association Joint Committee on Employee Benefits Annual Agency Meeting with OCR, her experience includes extensive compliance, risk management and data breach and other crisis event investigation, response and remediation under HIPAA and other laws.

    The American Bar Association (ABA) International Section Life Sciences Committee Vice Chair, a Scribe for the ABA Joint Committee on Employee Benefits (JCEB) Annual OCR Agency Meeting, former Vice President of the North Texas Health Care Compliance Professionals Association, past Chair of the ABA Health Law Section Managed Care & Insurance Section, past ABA JCEB Council Representative, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has worked closely with a diverse range of physicians, hospitals and healthcare systems, DME, Pharma, clinics, health care providers, managed care, insurance and other health care payers, quality assurance, credentialing, technical, research, public and private social and community organizations, and other health industry organizations and their management deal with governance; credentialing, patient relations and care; staffing, peer review, human resources and workforce performance management; outsourcing; internal controls and regulatory compliance; billing and reimbursement; physician, employment, vendor, managed care, government and other contracting; business transactions; grants; tax-exemption and not-for-profit; licensure and accreditation; vendor selection and management; privacy and data security; training; risk and change management; regulatory affairs and public policy and other concerns.

    Past Chair of the ABA Managed Care & Insurance Interest Group and, a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also has extensive health care reimbursement and insurance experience advising and defending health care providers, payers, and others about Medicare, Medicaid, Medicare and Medicaid Advantage, Tri-Care, self-insured group, association, individual and group and other health benefit programs and coverages including but not limited to advising public and private payers about coverage and program design and documentation, advising and defending providers, payers and systems and billing services entities about systems and process design, audits, and other processes; provider credentialing, and contracting; providers and payer billing, reimbursement, claims audits, denials and appeals, coverage coordination, reporting, direct contracting, False Claims Act, Medicare & Medicaid, ERISA, state Prompt Pay, out-of-network and other nonpar, insured, and other health care claims, prepayment, post-payment and other coverage, claims denials, appeals, billing and fraud investigations and actions and other reimbursement and payment related investigation, enforcement, litigation and actions.

    Heavily involved in health care and health information technology, data and related process and systems development, policy and operations innovation and a Scribe for ABA JCEB annual agency meeting with OCR for many years who has authored numerous highly-regarded works and training programs on HIPAA and other data security, privacy and use, Ms. Stamer also is widely recognized for her extensive work and leadership on leading edge health care and benefit policy and operational issues including meaningful use and EMR, billing and reimbursement, quality measurement and reimbursement, HIPAA, FACTA, PCI, trade secret, physician and other medical confidentiality and privacy, federal and state data security and data breach and other information privacy and data security rules and many other concerns.

    In connection with this work, Ms. Stamer has worked extensively with health care providers, health plans, health care clearinghouses, their business associates, employers and other plan sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA, FACTA, trade secret and other information privacy and data security rules, including the establishment, documentation, implementation, audit and enforcement of policies, procedures, systems and safeguards, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and and enforcement, and a host of other related concerns. Her clients include public and private health care providers, health insurers, health plans, technology and other vendors, and others.

    Her work includes both regulatory and public policy advocacy and thought leadership, as well as advising and representing a broad range of health industry and other clients about policy design, drafting, administration, business associate and other contracting, risk assessments, audits and other risk prevention and mitigation, investigation, reporting, mitigation and resolution of known or suspected violations or other incidents and responding to and defending investigations or other actions by plaintiffs, DOJ, OCR, FTC, state attorneys’ general and other federal or state agencies, other business partners, patients and others.

    In addition to representing and advising these organizations, she also has conducted training on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, MGMA, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

    A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in Pensions, healthcare, workforce, immigration, tax, education and other areas.

    A popular lecturer and widely published author on health industry concerns, Ms. Stamer continuously advises health industry clients about compliance and internal controls, workforce and medical staff performance, quality, governance, reimbursement, privacy and data security, and other risk management and operational matters. Ms. Stamer also publishes and speaks extensively on health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns.

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; a ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

    Ms. Stamer also is a highly popular lecturer, symposium and chair, faculty member and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management. Examples of her many highly regarded publications on these matters include “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security: Beyond HIPAA,” as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, Insurance Thought Leadership and many other prominent publications and speaks and conducts training for a broad range of professional organizations.

    For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (469) 767-8872 or via e-mail here.

    About Solutions Law Press, Inc.™

    Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here.

    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 your profile here.

    ©2017 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ All other rights reserved. For information about republication or other use, please contact Ms. Stamer here.


    Employers, Benefit Plans & Exempt Org: Prepare For Shortened Deadlines & Other Changes To IRS Employee Plan & Exempt Organization Exam Documentation Request Procedures

    March 1, 2017

    Heads up tax-exempt and governmental entities, employer and other qualified employee benefit plan sponsor, fiduciaries, administrators, and recordkeepers and their management, accountants, attorneys, and other service providers and advisors.  Changes to the procedures that Internal Revenue Service (IRS) Tax Exempt and Government Entities TE/GE examiners use to make and enforce Information Document Request (IDR) in connection with an audit or other examination make it more important than ever that taxpayers use special care to collect, organize and maintain all of the data and documentation that examiners are likely to request in IDR and take other steps to prepare in advance to respond to an IDR.

    New procedures announced in the February 27, 2017 Memorandum For All TE/GE Examiners On New Process For All Information Document Requests and scheduled to take effect April 1 seek to expedite the examination process and reduce backlogs.  To accomplish this, the new procedures impose specific, tightened timelines for responding to IDRs and IRS follow and enforcement of data and document productions demanded by an IDR.  As part of these changes, the new procedures shorten the time that the examiners will issue early subpoena warnings and subpoenas to compel taxpayers to produce requested data.

    Taxpayers unable to respond in a timely fashion risk of both triggering these perilous enforcement procedures and an enhanced risk that IRS examiners will view the delay as an indication that the taxpayer may not be using the internal controls and processes expected by the IRS rules.  Accordingly, taxpayers should seek advise from experienced legal counsel about the policies, practices, data and information they might be expected to need to respond to a IDR or other government investigation, recommendations for conducting their operations to promote their ability to efficiently assemble and produce the necessary data, records and other information to respond to a IDR or other investigation, audit or enforcement action, and other appropriate steps to position their organizations timely to recognize and produce the often substantial data generally demanded by an IRD and minimize risks of liability likely to arise from an IRS examination or other governmental or private investigation or action.

    About The Author

    Recognized by LexisNexis® Martindale-Hubbell® as a “AV-Preeminent” (Top 1%/ the highest) and “Top Rated Lawyer,” with special recognition as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, the author of this update is widely known for her 28 plus years’ of work in health care, health benefit, health policy and regulatory affairs and other health industry concerns as a practicing attorney and management consultant, thought leader, author, public policy advocate and lecturer.

    Throughout her adult life and nearly 30-year legal career, Ms. Stamer’s legal, management and governmental affairs work has focused on helping health industry, health benefit and other employee benefit, insurance, technology and other highly regulated organizations and their management use the law, performance and risk management tools and process to manage people, performance, quality, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps these and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup legal and operational crises large and small that arise in the course of operations.

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, current American Bar Association (ABA) International Section Life Sciences Committee Vice Chair, Scribe for the ABA Joint Committee on Employee Benefits (JCEB) Annual OCR Agency Meeting, former Vice President of the North Texas Health Care Compliance Professionals Association, past Chair of the ABA Health Law Section Managed Care & Insurance Section, past ABA JCEB Council Representative, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Compliance Chair of the National Kidney Foundation of North Texas, and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer’s includes nearly 30 years’ of work with a diverse range of health industry clients on an extensive range of matters.

    Ms. Stamer has worked closely with health industry, managed care and insurance, employee benefit, financial services, technology, restructuring, retail, hospitality, manufacturing, consulting, sales, energy, import-export, staffing and other businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of staffing, human resources and workforce performance management, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

    As a core component of her work, Ms. Stamer has worked extensively throughout her career with health care providers, health plans and insurers, managed care organizations, health care clearinghouses, their business associates, employers, banks and other financial institutions, management services organizations, professional associations, medical staffs, accreditation agencies, auditors, technology and other vendors and service providers, and others on legal and operational compliance, risk management and compliance, public policies and regulatory affairs, contracting, payer-provider, provider-provider, vendor, patient, governmental and community relations and matters including extensive involvement advising, representing and defending public and private hospitals and health care systems; physicians, physician organizations and medical staffs; specialty clinics and pharmacies; skilled nursing, home health, rehabilitation and other health care providers and facilities; medical staff, accreditation, peer review and quality committees and organizations; billing and management services organizations; consultants; investors; technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, insurers, self-insured health plans and other payers; and other health industry clients to establish and administer compliance and risk management policies; comply with requirements, investigate and respond to Board of Medicine, Health, Nursing, Pharmacy, Chiropractic, and other licensing agencies, Department of Aging & Disability, FDA, Drug Enforcement Agency, OCR Privacy and Civil Rights, Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; JCHO and other accreditation and quality organizations; private litigation and other federal and state health care industry investigation, enforcement including insurance or other liability management and allocation; process and product development, contracting, deployment and defense; evaluation, commenting or seeking modification of regulatory guidance, and other regulatory and public policy advocacy; training and discipline; enforcement, and a host of other related concerns for public and private health care providers, health insurers, health plans, technology and other vendors, employers, and others, and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns.

    Best known for her thoughleadership and experience on health benefit and other health and insurance industy matters, Ms. Stamer has worked throughout her career health care, health benefit and insurance and health information technology, data and related process and systems development, policy and operations design, management, product development, innovation, administration, public policy, regulatory compliance, enforcement, contracting, privacy and data security and related matter.  Ms. Stamer continuously advises health and insurance industry clients about licensing, regulatory compliance and internal controls, workforce, agent and broker and medical staff performance, claims and reimbursement, quality, governance, reimbursement, privacy and data security, and other risk management and operational matters. Scribe for ABA JCEB annual agency meeting with OCR for many years, Ms. Stamer also is widely recognized for her extensive work and leadership on HIPAA, FACTA, PCI, IRC and other tax, Social Security, GLB, rade secret, physician and other medical confidentiality and privacy, federal and state data security and data breach and other information privacy and data security rules and concerns including policy design, drafting, administration and training; business associate and other contracting; risk assessments, audits and other risk prevention and mitigation; investigation, reporting, mitigation and resolution of known or suspected breaches, violations or other incidents; and defending investigations or other actions by plaintiffs, OCR, FTC, state attorneys’ general and other federal or state agencies, other business partners, patients and others. Ms. Stamer has worked extensively with health care providers, health plans, health care clearinghouses, their business associates, employers and other plan sponsors, banks, insurers and other financial institutions, and others on trade secret confidentiality, privacy, data security and other risk management and compliance including the design, establishment, documentation, implementation, audit and enforcement of policies, procedures, systems and safeguards, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR, FTC and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and enforcement, and a host of other related concerns.

    Her clients include public and private health care providers, health insurers, health plans, employers, payroll, staffing, recruitment, insurance and financial services, technology and other vendors, and others.  In addition to representing and advising these organizations, she also has conducted training on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others. Ms. Stamer also has authored numerous highly-regarded works and training programs on HIPAA and other data security, privacy and use published by BNA, the ABA and other premier legal industy publishers.

    Ms. Stamer also has extensive experience with a diverse array of other human resources and other staffing, services, outsourcing and other workforce, qualified and nonqualified employee benefit, compensation, and related matters, their design, documentation, administration, modification, enforcement and defense and other related operational, compliance and risk management.  Her experience includes advising andassisting employer and other plan sponsors, fiduciaries, administrators, vendors and others with and program design, documentation and ongoing administration administration for compliance and defensibility under IRS and other federal and state tax, OFCCP, CAS, SCA, Davis Bacon, SEC and other corporate, ERISA and other federal and state labor and employment, SEC and other corporate, Department of Insurance and other laws and regulations; advising and assisting buyers, sellers, investors, debtors, creditors, trustees, plan fiduciaries and service providers and others in relation to business transactions, restructurings, bankruptcies and other substantial corporate and business events and transactions including significant work involving amendment, termination, windup and restructuring of employee benefit plans and workforce concerns in highly publicized fiduciary, securities or other misconduct investigation and enforcement, bankruptcy, restructuring or other distress situations.

    A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy and governmental and regulatory affairs experience, Ms. Stamer also is widely recognized for regulatory and policy work, advocacy and outreach on healthcare, education, aging, disability, savings and retirement, workforce, ethics, and other policies. Throughout her adult life and career, Ms. Stamer has provided thought leadership; policy and program design, statutory and regulatory development design and analysis; drafted legislation, proposed regulations and other guidance, position statements and briefs, comments and other critical policy documents; advised, assisted and represented health care providers, health plans and insurers, employers, professional. and trade associations, community and government leaders and others on health care, health, pension and retirement, workers’ compensation, Social Security and other benefit, insurance and financial services, tax, workforce, aging and disability, immigration, privacy and data security and a host of other international and domestic federal, state and local public policy and regulatory reforms through her involvement and participation in numerous client engagements, founder and Executive Director of the Coalition for Responsible Health Policy and its PROJECT COPE: the Coalition on Patient Empowerment, adviser to the National Physicians Congress for Healthcare Policy, leadership involvement with the US-Mexico Chamber of Commerce, the Texas Association of Business, the ABA JCEB, Health Law, RPTE, Tax, Labor, TIPS, International Life Sciences, and other Sections and Committees, SHRM Governmental Affairs Committee and a host of other involvements and activities.

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also publishes and speaks extensively on health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her insights on these and other related matters appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.  In addition to her many years of service as a scrivener for the ABA JCEB’s meeting with OCR, for instance, she also serves as Chair the Southern California ISSA Health Care Privacy & Security Summit, and an editorial advisory board member, author, program chair or steering committee member, and faculties for a multitude of other programs and publications regarding privacy, data security, technology and other compliance, risk management and operational concerns in the health care, health and other insurance, employee benefits and human resources, retail, financial services and other arenas.Ms. Stamer also shares her thought leadership, experience and advocacy on HIPAA and other concerns by her service in the leadership of a broad range of other professional and civic organization including her involvement as the Vice Chair of the North Texas Healthcare Compliance Association, Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Board Compliance Chair and Board member of the National Kidney Foundation of North Texas, current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative and current RPTE Representative to the ABA Health Law Coordinating Council, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

    Ms. Stamer also is a highly popular lecturer, symposium and chair, faculty member and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management. Examples of her many highly regarded publications on these matters include “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security: Beyond HIPAA,” as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, Insurance Thought Leadership and many other prominent publications and speaks and conducts training for a broad range of professional organizations.

    For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (469) 767-8872 or via e-mail here.

    About Solutions Law Press, Inc.™

    Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here such as:

    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 your profile here.

    ©2017 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ All other rights reserved.


    IRS Changing Employee Plans & Exempt Organization Audit Procedures

    November 21, 2016

    Employee benefit plans and tax-exempt organizations facing Internal Revenue Service (IRS) audits or investigations after April, 2016, their leaders and advisors should prepare for some changes in the practices IRS agents will use to issue and enforce document requests (IDRs) after March 31.

    The IRS  Tax Exempt and Government Entities Division (TEGE) just issued updated internal guidance (Guidance) governing the procedures its agents will use to gather information for employee benefit plan and exempt organization examinations including information requests made in connection with:

    • Employee Benefit Form 5500 Examination Procedures
    • Exempt Organizations Pre-Audit Procedures
    • On-Site Examinations
    • Tax Exempt Bonds Examinations
    • Indian Tribal Government Examinations and
    • Federal, State and Local Governments (FSLG) Examinations

    The new Guidance follows other recent announcements of changes of IRS employee plan or exempt organization procedures such as recently announced changes in IRS employee plan correction procedures.  See, e.g., IRS Qualified Plan Correction Procedures Changing 1/1/17.

    The new procedures defined in the Guidance apply more broadly and take effect April 1, 2017.  The Guidance also requires that TEGE update the following IRMs to specifically reflect the new procedures within the next two years:

    • IRM 4.71.1, Overview of Form 5500 Examination Procedures;
    • IRM 4.75.10, Exempt Organizations Pre-Audit Procedures;
    • IRM 4.75.11, On-Site Examination Guidelines;
    • IRM 4.81.5, Tax Exempt Bonds Examination Program Procedures – Conducting the Examination;
    • IRM 4.86.5, Conducting Indian Tribal Government Examinations; and
    • IRM 4.90.9, Federal, State and Local Governments (FSLG) – Procedures, Workpapers and Report Writing.

    Among other things, the new Guidance will require “active involvement” by managers of IRS examiners’ early in the process.  The Guidance also calls for:

    • Taxpayers to be involved in the IDR process.
    • Examiners to discuss the issue being examined and the information needed with the taxpayer prior to issuing an IDR.
    • Examiners to ensure that the IDR clearly states the issue and the relevant information they are requesting.
    • If the taxpayer does not timely provide the information requested in the IDR by the agreed upon date, including extensions, examiners to issue a delinquency notice.
    • If the taxpayer fails to respond to the delinquency notice or provides an incomplete response, for the examiner to issue a pre-summons notice to advise the taxpayer that the IRS will issue a summons unless the missing items are fully provided.
    • For a summons to be issued if the taxpayer fails to provide a complete response to the pre-summons letter by its response due date.

    According to TEGE the new procedures set forth in the Guidance are designed to “ensure” that IRS Counsel is prepared to enforce IDRs through the issuance of a summons when necessary while also reinforcing the IRS’ commitment to the respect of taxpayer rights under the Taxpayer Bill of Rights.  TEGE says the updated procedures established in the Guidance will promote these goals by:

    • Providing for open and meaningful communication between the IRS and taxpayers;
    • Reducing taxpayer burdens
    • Providing for consistent treatment of taxpayers;
    • Allowing the IRS to secure more complete and timely responses to IDRs;
    • Providing consistent timelines for IRS agents to review IDR responses; and
    • Promoting timely issue resolution.

    While it remains to be seen exactly how well the new procedures will promote these goals in operation, leaders, sponsors, administrators and tax advisors to employee benefit plans and exempt organizations tagged for audits after the Guidelines take effect will want to ensure that they review and fully understand the new procedures as soon as possible after receiving notice of the audit.

    A clear understanding of the procedures can help the entities and their representatives to take advantage of all available options for mitigating exposures and liability from the audit as well as to avoid unfortunate missteps that could result in forfeiture of otherwise available tax-related rights and options or otherwise increase the tax and other associated risks and liabilities of the entities or others associated with them arising from the audit.

    Along with responding to these tax-related risks, leaders and advisors of employee benefit plan and exempt organizations also need to keep in mind the often substantial non-tax related risks that may arise concurrently or evolve from a TEGE or other tax-related audit or investigation. The often substantial tax and non-tax exposures typically makes it desirable if not necessary to involve experienced legal counsel in the process as soon as possible.

    To help respond to the audit and manage its tax and non-tax related risks and, leaders responsible for these entities generally not only will want to seek legal advice within the scope of attorney-client privilege from legal counsel immediately after receiving an IDR or other notice of an audit or investigation, as well as consider periodically consulting experienced legal counsel for assistance in conducting pre-audit assessment of compliance and other compliance and risk management planning.

    Early involvement of legal counsel generally is necessary both to understand and manage both the tax and non-tax exposures associated with the audit, as well as to preserve and utilize the potential benefits of attorney-client privilege and other evidentiary privileges that could help to mitigate both the tax and non-tax related risks.  While federal tax rules afford some evidentiary privileges to certain accounting professionals when providing tax representation or advice, the protective scope of such privileges generally are more limited than attorney-client privilege and work product evidentiary privileges and typically do not apply to non-tax matters. As a result, most entities and their leaders will want to consider involvement of legal counsel to maximize privilege protections and non-tax related exposures even if the parties plan for a qualified tax professional or other consultant to play a significant role in assisting them to prepare for and respond to the audit.

    About The Author

    Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney and management consultant, author, public policy advocate and lecturer widely known for work, teachings and publications.

    Ms. Stamer works with health industry and other businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other concerns by her service in the leadership of a broad range of other professional and civic organization including her involvement as the Vice Chair of the North Texas Healthcare Compliance Association; Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Gulf Coast TEGE Council Exempt Organization Coordinator; a founding Board Member and past President of the Alliance for Healthcare Excellence; former board member and Vice President of the Managed Care Association; past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; a member and advisor to the National Physicians’ Council for Healthcare Policy; current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee; current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section; Past Chair of the ABA Health Law Section Managed Care & Insurance Section; a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group; immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative and current RPTE Representative to the ABA Health Law Coordinating Council; past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former member of the Board of Directors, Treasurer, Member and Continuing Education Chair of the Southwest Benefits Association and others.

    Ms. Stamer also is a highly popular lecturer, symposia chair and author, who publishes and speaks extensively on health and managed care industry, human resources, employment, employee benefits, compensation, and other regulatory and operational risk management. Examples of her many highly regarded publications on these matters include the “Texas Payday Law” Chapter of Texas Employment Law, as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. For additional information about Ms. Stamer, see CynthiaStamer.com   or contact Ms. Stamer via email here  or via telephone to (469) 767-8872.

    About Solutions Law Press, Inc.™

    Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources at SolutionsLawPress.com such as:

    If you or someone else you know would like to receive future updates about developments on these and other concerns, please provide your current contact information and preferences including your preferred e-mail by creating or updating your profile here.

    NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as an admission.  The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues.  Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The presenter and the program sponsor disclaim, and have no responsibility to provide any update or otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

    Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department 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

    ©2016 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™  All other rights reserved.


    DOL Aggressively Targeting Restaurants For Wage & Hour & Child Labor Law Violations

    November 3, 2016

    Restaurant employers beware! Restaurants are the target of a highly successful, U.S. Department of Labor Wage and Hour Division (WHD) restaurant enforcement and compliance initiative that WHD already has used to nail a multitude of restaurants across the country for “widespread violations” of Fair Labor Standards Act (FLSA) minimum wage, overtime, child labor and other wage and hour laws (WH Law).

    Having reportedly found WH Law violations in “nearly every one” of the WH Law investigations conducted against restaurant employers during 2016 and recovered millions of dollars of back pay and penalties from restaurants caught through investigations conducted under its WHD Restaurant Enforcement Initiative, WHD Administrator Dr. David Weil recently confirmed WHD plans to expand the restaurant employers targeted for investigation and other efforts to punish and correct WH Law violations under the Restaurant Enforcement Initiative through 2017 in an October 5, 2016 WHD News Release: Significant Violations In The Austin Restaurant Industry Raise Concerns For Us Labor Department Officials (News Release).

    The News Release quotes Administrator Weil as stating:

    The current level of noncompliance found in these investigations is not acceptable …WHD will continue to use every tool we have available to combat this issue. This includes vigorous enforcement as well as outreach to employer associations and worker advocates to ensure that Austin restaurant workers receive a fair day’s pay for a fair day’s work.

    Given the substantial back pay, interest, civil or in the case of willful violations, criminal penalties, costs of defense and prosecution and other sanctions that restaurant employers, their owners and management can face if their restaurant is caught violating FLSA or other WH Laws, restaurants and their leaders should arrange for a comprehensive review within the scope of attorney-client privilege of the adequacy and defensibility of their existing policies, practices and documentation for classifying, assigning duties, tracking regular and overtime hours, paying workers and other WH Law compliance responsibilities and opportunities to mitigate risks and liabilities from WH Law claims and investigations.

    Many Restaurants Already Nailed Through Restaurant Enforcement Initiative

    Even before the planned 2017 expansion of its Restaurant Enforcement Initiative, WHD’s enforcement record shows WHD’s efforts to find and punish restaurants that violate WH Laws are highly successful. Restaurant employers overwhelmingly are the employers targeted by WHD in the vast majority of the WH Law settlements and prosecutions announced in WHD News Releases published over the past two years, including aggregate back pay and penalty awards of more than $11.4 million recovered through the following 31 actions announced by WHD between January 1, 2016 and October 31, 2016:

    Enforcement Actions Highlight Common Restaurant WH Law Compliance Concerns

    Restaurant employers, like employers in most other industries, are subject to a host of minimum wage, overtime and other requirements including the FLSA requirement that covered, nonexempt employees earn at least the federal minimum wage of $7.25 per hour for all regular 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 and must comply with child labor, anti-retaliation and other WH Law requirements.

    The News Release identified some of the common violations WHD uncovered in these investigations included employers:

    • Requiring employees to work exclusively for tips, with no regard to minimum-wage standards;
    • Making illegal deductions from workers’ wages for walkouts, breakages, credit card transaction fees and cash register shortages, which reduce wages below the required minimum wage;
    • Paying straight-time wages for overtime hours worked.
    • Calculating overtime incorrectly for servers based on their $2.13 per hour base rates before tips, instead of the federal minimum wage of $7.25 per hour.
    • Failing to pay proper overtime for salaried non-exempt cooks or other workers;
    • Creating illegal tip pools involving kitchen staff;
    • Failing to maintain accurate and thorough records of employees’ wages and work hours.
    • Committing significant child labor violations, such as allowing minors to operate and clean hazardous equipment, including dough mixers and meat slicers.

    Use Care To Verify Tipped Employees Paid Properly

    Based on the reported violations, restaurants employing tipped employees generally will want to carefully review their policies, practices and records regarding their payment of tipped employees. Among other things, these common violations reflect a widespread misunderstanding or misapplication of special rules for calculating the minimum hourly wage that a restaurant must pay an employee that qualifies as a tipped employee.  While special FLSA rules for tipped employees may permit a restaurant to claim tips (not in excess of $5.12 per hour) actually received and retained by a “tipped employee,” not all workers that receive tips are necessarily covered by this special rule. For purposes of this rule, the definition of “tipped employee” only applies to an employee who customarily and regularly receives more than $30 per month in tips.

    Also, contrary to popular perception, the FLSA as construed by the WHD does not set the minimum wage for tipped employees at $2.13 per hour. On the contrary, the FLSA requirement that non-exempt workers be paid at least the minimum wage of $7.25 per hour for each regular hour worked also applies to tipped employees. When applicable, the special rule for tipped employees merely only allows an employer to claim the amount of the tips that the restaurant can prove the tipped employee actually received and retained (not in excess of $5.13 per hour) as a credit against the minimum wage of $7.25 per hour the FLSA otherwise would require the employer to pay the tipped employee. Only tips actually received by the employee may be counted in determining whether the employee is a tipped employee and in applying the tip credit.  If a tipped employee earns less than $5.13 per hour in tips, the restaurant must be able to demonstrate that the combined total of the tips retained by the employee and the hourly wage otherwise paid to the tipped employee by the restaurant equaled at least the minimum wage of $7.25 per hour.

    Furthermore, restaurant or other employers claiming a tip credit must keep in mind that the FLSA generally provides that tips are the property of the employee. The FLSA generally prohibits an employer from using an employee’s tips for any reason other than as a credit against its minimum wage obligation to the employee (“tip credit”) or in furtherance of a valid tip pool.

    Also, whether for purposes of applying the tip credit rules or other applicable requirements of the FLSA and other wage and hour laws, restaurant employers must create and retain appropriate records and other documentation regarding worker age, classification, hours worked, tips and other compensation paid and other evidence necessary to defend their actions with respect to tipped or other employees under the FLSA and other WH Law rules. Beyond accurately and reliably capturing all of the documentation required to show proper payment in accordance with the FLSA, restaurants also should use care to appropriately document leave, discipline and other related activities as necessary to show compliance with anti-retaliation, equal pay, family and medical leave, and other mandates, as applicable.  Since state law also may impose additional minimum leave, break time or other requirements, restaurants also generally will want to review their policies, practices and records to verify their ability to defend their actions under those rules as well.

    Child Labor Rules Require Special Care When Employing Minors

    While hiring workers under the age of 18 (minors) can help a restaurant fulfill its staffing needs while providing young workers valuable first time or other work experience, restaurants that hire minors must understand and properly comply with any restrictions on the duties, work hours or other requirements for employment of the minor imposed by federal or state child labor laws.

    As a starting point, the legal requirements for employing minors generally greater, not less, than those applicable to the employment of an adult in the same position.  Employers employing workers who are less than 18 years of age (minors) should not assume that the employer can pay the minor less than minimum wage or skip complying with other legal requirements that normally apply to the employment of an adult in that position by employing the minor in an “internship” or other special capacity. The same federal and state minimum wage, overtime, safety and health and nondiscrimination rules that generally apply to the employment of an adult generally will apply to its employment of a worker who is a minor.

    Beyond complying with the rules for employment of adults, restaurants employing minors also must ensure that they fully comply with all applicable requirements for the employment of minors imposed under the FLSA child labor rules and applicable state law enacted to ensure that when young people work, the work is safe and does not jeopardize their health, well-being or educational opportunities.   Depending on the age of the minor, the FLSA or state child labor rules may necessitate that a restaurant tailor the duties and hours of work of an employee who is a minor to avoid the substantial liability that can result when an employer violates one of these child labor rules.

    The FLSA child labor rules, for instance, impose various special requirements for the employment of youth 14 to 17 years old. See here.  As a starting point, the FLSA child labor rules prohibit the any worker less than 18 years of age from operating or cleaning dough mixers, meat slicers or other hazardous equipment. Depending on the age of the minor worker, the FLSA child labor rules or state child labor laws also may impose other restrictions on the duties that the restaurant can assign or allow the minor to perform.  Restaurants hiring any worker that is a minor must evaluate the duties identified as hazardous “occupations” that the FLSA child labor rules prohibit a minor of that age to perform here as an “occupation” and take the necessary steps to ensure the minor is not assigned and does not perform any of those prohibited activities in the course of his employment.

    In addition to ensuring that minors don’t perform prohibited duties, restaurants employing minors also comply with all applicable restrictions on the hours that the minor is permitted to work based on the age of the minor worker.  For instance, the FLSA and state child labor rules typically prohibit scheduling a minor less than 16 years of age to work during school hours and restrict the hours outside school hours the minor can work based on his age.  Additional restrictions on the types of jobs and hours 14- and 15-year-olds may work also may apply.

    Compliance with the FLSA child labor rules is critically important for any restaurant or other employer that employs a minor, particularly since the penalties for violation of these requirements were substantially increased in 2010, as Streets Seafood Restaurant learned earlier this year.

    According to a WHD News Release, Street’s Seafood Restaurant paid $14,288 in minimum wage and overtime back wages and an equal amount in liquidated damages totaling $28,577 to eight employees, and also was assessed a civil money penalty of $14,125 for FLSA child labor violations committed in the course of its employment of four minors ages 15 to 17. Specifically, investigators found Street’s Seafood Restaurant:

    WHD’s announcement of the settlement resolving these child labor laws quotes Kenneth Stripling, director of the division’s Birmingham District Office as stating:

    Employing young people provides valuable experience, but that experience must never come at the expense of their safety …Additionally, employers have an obligation to pay employees what they have legally earned. All workers deserve a fair day’s pay for a fair day’s work. Unfortunately, Street’s Seafood violated not only child labor laws, but has also shorted workers’ pay. The resolution of this case sends a strong message that we will not tolerate either of those behaviors.

    Restaurants Must Act To Minimize Risks

    Beyond WHD’s direct enforcement actions, WHD also is seeking to encourage private enforcement of WH Law violations by conducting an aggressive outreach to employees, their union and private plaintiff representatives, states and others. Successful plaintiffs in private actions typically recover actual back pay, double damage penalties plus attorneys’ fees and costs. The availability of these often lucrative private damages makes FLSA and other WH Law claims highly popular to disgruntled or terminated workers and their lawyers.  When contemplating options to settle claims WH Law claims made by a worker, employers need to keep in mind that WHD takes the position that settlements with workers do not bar the WHD from taking action unless the WHD joins in the settlement and in fact, past settlements may provide evidence of knowingness or willfulness by the employer in the event of a WHD prosecution.  The substantial private recoveries coupled with these and other WHD enforcement and other compliance actions mean bad news for restaurant employers that fail to manage their FLSA and other WH Law compliance.  Restaurant employers should act within the scope of attorney-client privilege to review and verify their compliance and consult with legal counsel about other options to minimize their risk and streamline and strengthen their ability to respond to and defend against audits, investigations and litigation.

    Beyond verifying the appropriateness of their timekeeping and compensation activities and documentation, restaurants and staffing or management organizations working with them also should use care to mitigate exposures that often arise from missteps or overly aggressive conduct by others providing or receiving management services or staffing services. All parties to these arrangements and their management should keep in mind that both parties participating in such arrangements bear significant risk if responsibilities are not properly performed.   Both service and staffing providers and restaurants using their services should insist on carefully crafted commitments from the other party to properly classify, track hours, calculate and pay workers, keep records, and otherwise comply with WH Laws and other legal requirements.  Parties to these arrangements both generally also will want to insist that these contractual reassurances are backed up with meaningful audit and indemnification rights and carefully monitor the actions of service providers rendering these services.

    About The Author

    Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,”“Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney and management consultant, author, public policy advocate and lecturer widely known for work, teachings and publications.

    Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares shared her thought leadership, experience and advocacy on these and other concerns by her service in the leadership of a broad range of other professional and civic organization including her involvement as the Vice Chair of the North Texas Healthcare Compliance Association, Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Board Compliance Chair and Board member of the National Kidney Foundation of North Texas, current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative and current RPTE Representative to the ABA Health Law Coordinating Council, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

    Ms. Stamer also is a highly popular lecturer, symposia chair and author, who publishes and speaks extensively on health and managed care industry, human resources, employment, employee benefits, compensation, and other regulatory and operational risk management. Examples of her many highly regarded publications on these matters include the “Texas Payday Law” Chapter of Texas Employment Law, as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. For additional information about Ms. Stamer, see CynthiaStamer.com or contact Ms. Stamer via email here or via telephone to (469) 767-8872.

    About Solutions Law Press, Inc.™

    Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources at http://www.solutionslawpress.com such as:

    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.

    ©2016 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ All other rights reserved.


    Criminal Conviction Of Plan Trustee, Outside Legal Counsel Shows Risks of Retaliating Against Whistleblowers For Reporting ERISA Violations

    August 1, 2016

    The U.S. Department of Labor’s just announced successful whistleblower prosecution in Perez v. Scott Brain, et al of an employee benefit plan trustee, and an individual lawyer and her law firm that served as the employee benefit plan’s outside legal counsel of violating the fiduciary responsibility and whistleblower rules of the Employee Retirement Income Security Act of 1974 (ERISA) illustrates why employee benefit plan sponsors, trustees or other fiduciaries, their management, legal counsel, auditors and other service providers must both prudently investigate whistleblower allegations or other evidence of potential wrongdoing involving their employee benefit plans and resist the temptation to retaliate against employees or others for reporting or cooperating in the investigation of alleged improprieties involving an employee benefit plan.

    The Brain decision highlights the care that employee benefit plan sponsors, fiduciaries, advisors and service providers and their management must use when responding to allegations or other evidence of wrongdoing relating to an employee benefit plan or its administration, investigating and addressing alleged misconduct or other performance or disciplinary concerns involving parties whose report or involvement in investigations of ERISA or other misconduct could form the basis of a potential ERISA 510 or other retaliation complaint.

    The decision also makes clear that outside legal counsel advising an employee benefit plan or its fiduciaries in relation to the investigation or response to charges of ERISA misconduct involving an employee benefit plan must use care to avoid actions that could render them liable for participation in acts of illegal retaliation, violating their duty of loyalty to the plan by allowing themselves to become involved in a conflict of interest when investigating or defending potential wrongdoing involving an employee benefit plan, or engaging in other discretionary actions that could constitute a breach of fiduciary duty in violation of ERISA.

    In Perez v. Scott Brain, et al., the U.S. District Court for the Central District of California ruled that Cement Masons Southern California Trust Fund’s trustee and Cement Masons Local 600 business manager, Scott Brain (Brain) and outside trust fund legal counsel, Melissa Cook, violated sections 510 and 404 of ERISA by causing the firing a trust fund employee Cheryle Robbins (Robbins) and an employee of the plan’s third party administrator, Cory Rice (Rice), in retaliation for their involvement in filing an internal complaint about and cooperating with the Labor Department’s Employee Benefit Security Administration’s federal criminal investigation of reports of Brain’s wrongful interference as a trustee with collections and contributions from unionized employers.

    In 2011, Robbins, director of the trust funds’ audit and collections department, responded to a federal criminal investigation into Brain’s activities with contractors. The same year, she and Rice, who worked for the third-party administrator to the trust fund, American Benefit Plan Administrators, now, Zenith American Solutions (Zenith), participated in an effort to complain about Brain’s interference with efforts to collect delinquent contributions from contractors. Within weeks of this conduct, Robbins was suspended from her employment with the trust fund. Less than six months later, both Robbins and Rice were fired.

    The court’s 71-page decision chronicles the coordinated retaliatory campaign orchestrated by Brain and Cook that led to Robbins’ suspension and firing by the employee benefit plan as well as the termination of Cook by his employer, Zenith..

    With respect to Robbins’ suspension, the court found that the evidence showed Brain and Cook “were very upset with Robbins due to her contact with the [Department of Labor],” and that Brain and Cook “used their positions and influence to cause the other trustees to vote in favor of” suspending Robbins. To do so, the court explained, Brain and Cook “took the lead at the . . . [b]oard meeting with respect to the discussion of Robbins’ contact with the [Department of Labor]” and “created an environment that was hostile to her,” which “caused the trustees to vote to place her on leave.” The court noted that the two “‘set in motion’ the decision by the Joint Board to put Robbins on leave [.]”

    As for Rice’s firing, the court explained how Brain and Cook retaliated against Rice by pressuring his employer, Zenith, into firing Rice and manipulating the Zenith relationship to deter Zenith from rehiring Rice in retaliation for his involvement in efforts to make an internal complaint about Brain.

    Based upon evidence introduced during a five-day trial, the District Court ruled that Brain, Cook and Cook’s law firm violated ERISA section 510 by suspending and then discharging Robbins, and causing Zenith to refuse to hire Robbins and to discharge Rice in retaliation for their participation in reporting Brian’s misconduct to the General President of the Operative Plasterers’ and Cement Masons’ International Association and because Robbins participated in a federal criminal investigation of Brain.  Specifically, the District Court ruled:

    • Brain, Cook and Cook’s law firm wrongfully retaliated against Robbins in violation of ERISA 510 for her communications with the DOL by placing her on administrative leave; causing the work performed by the department that Robbins previously managed to be outsourced to Zenith and by causing Zenith not to hire Robbins to participate in its work;
    • Brain, Cook and Cook’s law firm wrongfully retaliated against Rice in violation of ERISA 510 by causing Zenith to terminate Cook;
    • Brain breached his fiduciary duty under ERISA 404 by retaliating against Robbins and causing her to be placed on administrative leave and that Cook knowingly participated in that breach.

    The court held that Brain and Cook’s retaliatory conduct violated section 510 of ERISA, which prohibits retaliation against whistleblowers for complaining of ERISA violations or cooperating with a governmental investigation of such violations. The court also held that the couple’s retaliation against Robbins breached Brain’s fiduciary duties under ERISA section 404 to the trust funds and that Cook participated knowingly in that breach.

    In reaching its decision, the court rejected attorney Cook’s argument that she was somehow immunized from her unlawful conduct because she was an attorney to the trust funds.  Among other things, the court noted the “apparent conflict of interest” Cook had in representing the trust funds while being in an undisclosed “romantic relationship” with Brain, which existed as defendants carried out their retaliatory scheme. Reminding lawyers of their ethical duties in California, the court cited California Rule of Professional Conduct 3-310(B), which the court explained “requires that an attorney disclose to a client any personal relationship or interest that he or she knows, or with the exercise of reasonable diligence should know, could substantially affect her his or her professional judgment in advising the client.”

    As punishing for these criminal violations of ERISA, the District Court ordered the permanent removal of Brain as a trustee. It also ordered the permanent barring of Brain, Cook and her law firm from serving the Cement Masons Southern California Trust Funds. In addition, the court ordered Cook and her law firm to repay all attorneys’ fees she billed the trust funds for the actions she took in retaliating against whistleblowers Robbins and Rice.  These criminal sanctions were in addition to the $630,000 civil damage award that the Labor Department previously secured in lost wages and damages for Robbins, Rice and another worker victimized by Brain and Cook in August 2015.

    In addition to its successful prosecution of Brain, Cook and Cook’s law firm on these charges, the DOL also had sought, but failed to convince the District Court based on the evidence presented at trial to find Brain, Cook, Cook’s law firm and Brain’s fellow trust fund trustee Local 600 business agent and Joint Board of Trustees member Jaime Briceno guilty of wrongful retaliation against another alleged whistleblower or Briceno of breaching his fiduciary duties under ERISA by failing to prudently investigate Robbins’ allegations against Brain; or by voting to use assets of the Trust Funds to pay the cost of the settlement of the civil action brought by Robbins. The District Court also refused to consider a newly raised charge that Brain breached his fiduciary duty by failing to collect all monies owed to the Trust Funds on the grounds that the Labor Department had failed to timely raise the charge. While the court refused to convict Briceno, Brain, Cook or Cook’s law firm on the additional charges, the Labor Department’s prosecution of these claims illustrates that along with abstaining from retaliating against ERISA whistleblowers, employee benefit plan fiduciaries also should position themselves to defend against potential breach of fiduciary duty claims based on alleged inadequacies in their investigation or response to reports or other evidence of misconduct involving the plan by prudently investigating and acting to redress allegations or other evidence of potential wrongdoing in the administration of employee benefit plans or their assets.

    About The Author

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, the author of this update, attorney Cynthia Marcotte Stamer, is AV-Preeminent (the highest) rated attorney repeatedly recognized as a Martindale-Hubble as a “LEGAL LEADER™” and “Texas Top Rated Lawyer” in Health Care Law, Labor and Employment Law, and Business & Commercial Law and among the “Best Lawyers In Dallas” in ERISA, Labor and Employment and Healthcare Law by D Magazine for her nearly 30 years of experience and knowledge representing and advising employers, employee benefit plans, their sponsors, fiduciaries, service providers and vendors and others on these and other planning, business transaction and contracting, administration, compliance, risk management, audits, investigations, government and private litigation and other enforcement and other related matters.

    past Chair and current committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, a former ABA Joint Committee on Employee Benefits Council Representative ,

    Ms. Stamer’s legal and management consulting work throughout her nearly 30-year career has focused on helping management manage.  Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving,  she de[;pus jer her extensive legal and operational knowledge and experience to help organizations and their management use the law and process to manage people, process, compliance, operations and risk.

    As a key part of this work, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

    Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

    Well known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes. Common engagements include internal and external workforce hiring, management, training, performance management, compliance and administration, discipline and termination, and other aspects of workforce management including employment and outsourced services contracting and enforcement, sentencing guidelines and other compliance plan, policy and program development, administration, and defense, performance management, wage and hour and other compensation and benefits, reengineering and other change management, internal controls, compliance and risk management, communications and training, worker classification, tax and payroll, investigations, crisis preparedness and response, government relations, safety, government contracting and audits, litigation and other enforcement, and other concerns.

    Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, expat and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

    A former lead consultant to the Government of Bolivia on its Social Security reform law Ms. Stamer also is well-known for her leadership on U.S. health and pension, wage and hour, tax, workforce, tax, education, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas, Ms. Stamer for many years acted as the scribe responsible for leading the Joint Committee on Employee Benefits (JCEB) HHS Office of Civil Rights annual agency meeting and regularly participates in the OCR and other JCEB annual agency meetings, and participates in the development and submission of comments and other input to the agencies on regulatory, enforcement and other concerns. She also works as a policy advisor and advocate to many business, professional and civic organizations.

    Author of the thousands of publications and workshops these and other employment, employee benefits, health care, insurance, workforce and other management matters, Ms. Stamer also is a highly sought out speaker and industry thought leader known for empowering audiences and readers. Ms. Stamer’s insights on employee benefits, insurance, health care and workforce matters in Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, Modern Healthcare, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications. Ms. Stamer also regularly serves on the faculty and planning committees for symposia of LexisNexis, the American Bar Association, ALIABA, the Society of Employee Benefits Administrators, the American Law Institute, ISSA, HIMMs, and many other prominent educational and training organizations and conducts training and speaks on these and other management, compliance and public policy concerns.

    Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer serves on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and as an editorial advisor and contributing author of many other publications. Her leadership involvements with the American Bar Association (ABA) include year’s serving many years as a Joint Committee on Employee Benefits Council representative; ABA RPTE Section current Practice Management Vice Chair and Substantive Groups & Committees Committee Member, RPTE Employee Benefits & Other Compensation Committee Past Group Chair and Diversity Award Recipient, current Defined Contribution Plans Committee Co-Chair, and past Welfare Benefit Plans Committee Chair Co-Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; International Section Life Sciences Committee Policy Vice Chair; and a speaker, contributing author, comment chair and contributor to numerous Labor, Tax, RPTE, Health Law, TIPS, International and other Section publications, programs and task forces. Other selected service involvements of note include Vice President of the North Texas Healthcare Compliance Professionals Association; past EO Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former Southwest Benefits Association Board of Directors member, Continuing Education Chair and Treasurer; former Texas Association of Business BACPAC Committee Member, Executive Committee member, Regional Chair and Dallas Chapter Chair; former Society of Human Resources Region 4 Chair and Consultants Forum Board Member and Dallas HR Public Policy Committee Chair; former National Board Member and Dallas Chapter President of Web Network of Benefit Professionals; former Dallas Business League President and others. For additional information about Ms. Stamer, see CynthiaStamer.com or contact Ms. Stamer via email here or via telephone to (469) 767-8872.

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    For important information concerning 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.

    ©2016 Cynthia Marcotte Stamer, P.C. Non-exclusive license to republish granted to Solutions Law Press, Inc. All other rights reserved.

     


    Business Associate Rule Violations Behind $750K HIPAA Settlement

    April 21, 2016

    Health Plans, Sponsors & Business Associates Should Verify Plan’s HIPAA Compliance

    Employers and other health plan sponsors and the health plan fiduciaries and business associates providing services involving dealings on behalf of the plan with protected health information just received another reminder to confirm and be prepared to prove all required business associate agreements are in place and that the health plans otherwise properly are administering all policies, practices, safeguards and procedures for handling, using and disclosing electronic and other protected health information from the April 20, 2016 Department of Health & Human Services Office of Civil Rights (OCR) announcement of its latest resolution agreement settling Health Insurance Portability and Accountability Act (HIPAA) Privacy and Security Rule charges OCR made against a HIPAA-covered entity for violating HIPAA’s business associate agreement rules.

    OCR Charges Brought For Business Associate Agreement Violations

    HIPAA’s Privacy Rules generally apply to “covered entities,” which under HIPAA are health plans and insurers, health care providers, health care clearinghouses (Covered Entities) and “business associates,” which are individuals or entities that perform services that aid the  Covered Entity to perform its duties as a Covered Entity.

    The Resolution Agreement and Corrective Action Plan (Resolution Agreement) with Raleigh Orthopaedic Clinic, P.A. of North Carolina (Raleigh Orthopaedic) announced by OCR on April 20th requires Raleigh Orthopaedic to pay $750,000 to settle  charges OCR it violated the Privacy Rule by handing over protected health information of approximately 17,300 patients to a potential business partner without first executing a business associate agreement.

    Raleigh Orthopaedic is a provider group practice that operates clinics and a surgery center in the Raleigh, North Carolina area. OCR initiated its investigation of Raleigh Orthopaedic after receiving a breach report on April 30, 2013.  OCR’s investigation indicated that Raleigh Orthopaedic violated the Privacy Rules by releasing the x-ray films and related protected health information of 17,300 patients to an entity that promised to transfer the images to electronic media in exchange for harvesting the silver from the x-ray films.  Raleigh Orthopaedic failed to execute a business associate agreement with this entity before turning over the x-rays and PHI.

    OCR says this sharing of the x-ray files and other protected health information by Raleigh Orthopaedic violated the Privacy Rules.

    Specifically, the Privacy Rules prohibit Covered Entities and their business associates from using, accessing and disclosing protected health information except as specifically permitted in the Privacy Rules. As part of these rules, the “Business Associate” requirements of the Privacy Rule prohibit Covered Entities from disclosing or allowing business associates to use, and business associates from receiving or using protected health information unless the parties first enter into a written business associate agreement that complies with the requirements of the Privacy Rules.

    The Resolution Agreement settles OCR charges that Raleigh Orthopaedic violated this Business Associate Agreement requirement by sharing the x-rays and other protected health information with the service provider without first entering a business associate agreement. Under the Settlement Agreement, Raleigh Orthopaedic must pay a $750,000 payment, as well as revise its policies and procedures to: establish a process for assessing whether entities are business associates; designate a responsible individual to ensure  business associate agreements are in place prior to disclosing PHI to a business associate; create a standard template business associate agreement; establish a standard process for maintaining documentation of a business associate agreements for at least six (6) years beyond the date of termination of a business associate relationship; and limit disclosures of PHI to any business associate to the minimum necessary to accomplish the purpose for which the Covered Entity hires the business associate.

    Although the Resolution Agreement only addresses charges OCR brought against the Covered Entity, Raleigh Orthopaedic, business associates need to keep in mind that both Covered Entities and business associates now are responsible for ensuring compliance with the business associate agreement requirements of the Privacy Rules since the Stimulus Bill amended HIPAA to make most provisions of the Privacy Rule directly applicable to business associates as well as Covered Entities.

     Take Aways For Covered Entities & Their Business Associates 

    OCR’s announcement of the Resolution Agreement includes a strong message for other Covered Entities and business associates of the importance of taking seriously their responsibility under the Privacy Rule to ensure that the business associate agreement requirements of the Privacy Rule are met before business associates are allowed to receive, access or use protected health information. The announcement quotes Jocelyn Samuels, Director of the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) as stating.  “It is critical for entities to know to whom they are handing PHI and to obtain assurances that the information will be protected.” and “HIPAA’s obligation on covered entities to obtain business associate agreements is more than a mere check-the-box paperwork exercise.”

    In light of the Business Associate Rule and Director Samuels’ comments, Covered Entities and business associates alike should review the adequacy of their documentation, policies and practices regarding dealings with service providers who are or could collect, receive or use electronic or other protected health information to propose or perform services in the capacity as a business associate. Certainly both Covered Entities and business associates to ensure that they possess and are able to produce if needed signed business associate agreements for each current business associate agreement as well as that appropriate policies, practices and procedures are in place to ensure that all required business associate agreements are implemented before any disclosure or use of protected health information to the business associate in the future.  As part of these activities, both Covered Entities and business associates also should ensure their policies and practices appropriately provide for the retention of signed copies of all business associate agreements and other records, and the implementation of all other processes and procedures required to position the entity to be able to demonstrate it not only had policies requiring compliance, but appropriately implemented and administered those policies in accordance with the Privacy Rule.

    When conducting this review, Covered Entities and business associates also generally should consider the advisability of also reviewing their business associate agreements and the adequacy of these arrangements in light of any other contractual confidentiality and or contractual rights and commitments, regulatory requirements and other operational and risk management concerns that impact or interrelate with the relationship between the business associate and the Covered Entity. It is important to ensure that appropriate steps are taken to evaluate and properly integrate the confidentiality and other commitments that the Privacy Rules mandate a business associate agreement include with audit, performance assessment, and other data access or disclosure, trade secrets, confidentiality, performance standards and guarantees, indemnity and other contractual obligations of other agreements that could impact or be impacted  by the business associate agreements. Steps also should be taken to incorporate appropriate processes and procedures for ensuring that the Covered Entity and members of its workforce understand and consistently administer and document their use of appropriate processes to ensure that the business associate agreement and other requirements of the Privacy Rules are fulfilled.  In the case of employer sponsored plans subject to the Employee Retirement Income Security Act of 1974, for instance, the selection and proper oversight of business associates and the management of plan data both are subject to the fiduciary responsibility rules of ERISA.  Meanwhile, insurers, business associates and other plan vendors also generally should anticipate that beyond HIPAA, they also may be subject to data security, privacy and other mandates and exposures under state HIPAA-like rules for protected health information, as well as other obligations under insurance, data security, identity theft, breach, privacy and other state laws.

    The process of evaluating the adequacy of current arrangement and considering the advisability of changes to tighten existing practices in many cases will result in the discovery and discussion of potentially sensitive information about the adequacy of current or past compliance with the Privacy Rules or other matters. For example, it is possible that in the course of review, parties may be unable to locate a signed business associate agreement governing a relationship that the Privacy Rules require be subject to a business associate agreement or in the course of review, information indicating breaches of protected health information or other Privacy Rule violations may have occurred.  For this reason, most Covered Entities and their business associates will want to consider arranging for this review and analysis to be conducted within the scope of attorney-client privilege by or under the direction of qualified legal counsel with HIPAA experience that has entered into a business associate agreement with the Covered Entity or business associate.

    About The Author

    A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Cynthia Marcotte Stamer is a noted Texas-based management lawyer and consultant, author, lecturer and policy advocate, recognized as among the “Top Rated Labor & Employment Lawyers in Texas” by LexisNexis® Martindale-Hubbell® and as among the “Best Lawyers In Dallas” for her work in the field of “Tax: Erisa & Employee Benefits” and “Health Care” by D Magazine who works, writes and speaks extensively about HIPAA and other data privacy and security concerns.

    Ms. Stamer’s legal and management consulting work throughout her career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

    Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer helps management manage. Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce management operations and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.  Well-known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes.  Common engagements include internal and external workforce hiring, management, training, performance management, compliance and administration, discipline and termination, and other aspects of workforce management including employment and outsourced services contracting and enforcement, sentencing guidelines and other compliance plan, policy and program development, administration, and defense, performance management, wage and hour and other compensation and benefits, reengineering and other change management, internal controls, compliance and risk management, communications and training, worker classification, tax and payroll, investigations, crisis preparedness and response, government relations, safety, government contracting and audits, litigation and other enforcement, and other concerns.

    A Fellow in the American College of Employee Benefit Counsel, Ms. Stamer uses her deep and highly specialized knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, ex-patriate and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others.  She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

    Throughout her career, Ms. Stamer has advised these and other clients about health care, health plan, financial information, trade secret, privacy and other related compliance, data breach response and remediation and related compliance, risk management and related concerns.  In the course of this work, Ms. Stamer has accumulated an impressive resume of experience advising and representing clients on HIPAA and other privacy and data security concerns. The scribe for the American Bar Association (ABA) Joint Committee on Employee Benefits annual agency meeting with the Department of Health & Human Services Office of Civil Rights for several years, Ms. Stamer has worked extensively with health plans, health care providers, health care clearinghouses, their business associates, employer and other sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA and other information privacy and data security rules, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and enforcement, and a host of other related concerns. Her clients include public and private health plans, health insurers, health care providers, banking, technology and other vendors, and others.

    Beyond advising these and other clients on privacy and data security compliance, risk management, investigations and data breach response and remediation and other health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She also is the author of numerous highly acclaimed publications, workshops and tools for HIPAA or other compliance including training programs on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

    Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally.  A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas, Ms. Stamer annually leads the Joint Committee on Employee Benefits (JCEB) HHS Office of Civil Rights agency meeting and other JCEB agency meetings.  She also works as a policy advisor and advocate to many business, professional and civic organizations.

    Author of the thousands of publications and workshops these and other employment, employee benefits, health care, insurance, workforce and other management matters, Ms. Stamer also is a highly sought out speaker and industry thought leader known for empowering audiences and readers.  Ms. Stamer’s insights on employee benefits, insurance, health care and workforce matters in Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, Modern Healthcare, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications. Ms. Stamer also regularly serves on the faculty and planning committees for symposia of LexisNexis, the American Bar Association, ALIABA, the Society of Employee Benefits Administrators, the American Law Institute, ISSA, HIMMs, and many other prominent educational and training organizations and conducts training and speaks on these and other management, compliance and public policy concerns.  She will share updates on HIPAA and other health care and data security concerns when returns to speak and chair at the 4th Annual Healthcare Privacy and Security Forum scheduled on May 20, 2016 in Los Angeles.

    Beyond these involvements, Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see here or contact Ms. Stamer directly by email here or by telephone at (469) 767-8872.

    About Solutions Law Press, Inc.™

    Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also may be interested reviewing other Solutions Law Press, Inc.™ resources at www.solutionslawpress.com such as:

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    ©2016 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press. All other rights reserved.


    Legal Review Of Health Plan Documents, Processes Needed To Mitigate Employer’s Excise Tax & Other Health Plan Risks

    August 21, 2015

    Employers sponsoring health plans and members of their management named as plan fiduciaries or otherwise having input or oversight over health plan concerns should verify their company’s group health plan meets the out-of-pocket maximum rules of the Patient Protection and Affordable Care Act (ACA) § 1302(c)(1) as well as a long list of other federal health benefit rules to minimize the risk that violations will compel the sponsoring employer to self-assess, self-report on IRS Form 8928, and pay a $100 per day per violation excise tax penalty and while expose the plan and its fiduciaries to fiduciary or other liability under the Employee Retirement Income Security Act (ACA). Consequently, sponsoring employers and their management generally will want to ensure that their plan documents are properly updated to comply with the out-of-pocket maximum and other federal requirements, to require contractual commitments to administer the health plan in compliance with and to report, correct, and indemnify for violations of these requirements in vendor contracts with their health plan insurers, administrators and other vendors, and conduct documented audits to verify the health plan’s operational compliance with these requirements as interpreted by the Department of Health & Human Services (HHS), Department of Labor (DOL) and Internal Revenue Service (IRS) in form and operation. The new self-reporting and excise tax self-assessment and payment requirements for employers coupled with already long-standing fiduciary and other liabilities for fiduciaries, plan administrators and others makes it important that employers sponsoring group health plans and their management or other leaders overseeing or participating in plan design or vendor selection, plan administration or other plan related activities seek the advice and help of qualified, experienced legal counsel for assistance with conducting an appropriate compliance review and risk assessment of their health plans, correcting or taking other steps to mitigate risks from any past or existing violations, and steps to take to tighten documents, vendor contracts, and processes to mitigate compliance or other risks going forward.

    Employers, Insurers & Plan Fiduciaries Face Big Risks From Federal Health Plan Rule Violations

    As amended by ACA, health plan violations of ACA and various other federal health plan mandates carry big risks for health plans, their sponsoring employers, and representatives of sponsoring employers, insurers and third party administrators responsible as fiduciaries for administering a group health plan in accordance with these federal rules. As amended by ACA, federal law imposes significant penalties against plans, their fiduciaries and even the sponsoring employer if the group health plan violates the ACA out-of-pocket limit or a long list of other ACA and other federal group health rules. Group health plans can face lawsuits from covered persons, their health care providers as assignees or the DOL, to enforce rights to benefits, plus attorneys’ fees and other costs of enforcement. Beyond benefit litigation, the employer or representatives of the sponsoring employer, if any, named or acting as fiduciaries, insurer or third party service providers named or acting as fiduciaries, also could face fiduciary lawsuits seeking damages, equitable relief, and attorneys’ fees and costs of court, for failing to prudently administer the plan in accordance with its terms and the law brought by covered persons or their beneficiaries or the DOL as well as fiduciary breach penalties if the fiduciary breach action is brought by the DOL. If the plan fails to comply with claims and appeals procedures or other ERISA notification requirements, parties named or functioning as the plan administrator for this purpose also could face penalties of up to $125 per violation per day in the case of enforcement actions brought by participants and beneficiaries or $1025 per violation per day in the case of actions brought by the DOL, plus attorneys’ fees and other costs of enforcement.

    Except in rare circumstances where the sponsoring employer has carefully contracted to transfer fiduciary liability to its insurer or administrator and otherwise does not exercise or have a fiduciary obligation to exercise discretion or control over these responsibilities, employers sponsoring group health plans that violate federal mandates like the out-of-pocket limit often ultimately bear some or all of these liabilities even if the violation actually was committed by a plan vendor hired to administer the program either because the plan documents name the employer as the “named fiduciary” or “plan administrator” under ERISA, the employer bears fiduciary responsibility functionally for selection or oversight of the culpable party, the employer signed a contract, resolution or plan document obligating the employer to indemnify the service provider for the liability, or a combination of these reasons. Even where the employer avoids these direct or indirect ERISA exposures, however, employers now also need to be concerned that out-of-pocket limitation or other federal health plan rule violations will trigger expensive excise tax liability for the sponsoring employer.

    As part of ACA, the Internal Revenue Code now generally requires employers sponsoring a group health plan that violates the ACA out-of-pocket limit or a long list of other federal health plan rules after 2013 to self-assess, report and pay stiff new excise tax penalties of $100 per day per violation when filing their annual tax return. See, Businesses Must Confirm & Clean Up Health Plan ACA & Other Compliance Following Supreme Court’s King v. Burwell Decision;  More Work For Employers, Benefit Plans Following SCOTUS Same-Sex Marriage Ruling; 2016 & 2017 Health Plan Budgets, Workplans Should Anticipate Expected Changes To SBCs. Since prompt self-audit and correction can help mitigate these liabilities, business leaders should act quickly to engage experienced legal counsel for their companies for advice about how to audit their group health plan’s 2014 and 2015 compliance with the out-of-pocket limit and other federal health plan rules within the scope of attorney client privilege while managing fiduciary exposures that could result if the audit is improperly structured or conducted, as well as options for addressing potential 2014, 2015 and future years excise tax and other exposures that compliance deficiencies with these rules could trigger.

    While businesses inevitably will need to involve or coordinate with their accounting, broker, and other vendors involved with the plans, businesses generally will want to get legal advice in a manner that preserves their potential to claim attorney-client privilege to protect against discovery in the event of future enforcement or litigation actions sensitive discussions and analysis about compliance audits, plan design choices, and other risk management and liability planning as well as to get help identifying potential plan design, contracting, procedural or other changes that may be needed to fix compliance deficiencies and mitigate other risks, particularly in light of complexity of the exposures and risks.

    The Supreme Court’s recent King v. Burwell decision makes it particularly important that employers and other group health plan sponsors, and those named or serving functionally as the plan administrator or other fiduciary responsible for properly administering the group health plan in accordance with these rules move quickly to manage these risks. With the continued limited Republican majority in the Senate, Republicans lack sufficient votes to override a promised Presidential veto of any legislation that would repeal or substantially modify ACA. Meanwhile, President Obama is moving to help ensure that his Presidential Legacy includes implementation of ACA and to mitigate ACA’s budgetary impacts by collecting excise tax and other penalties from insurers, plan administrators and employers by instructing the Tri-Agencies to move forward on full implementation and enforcement of ACA and other federal health plan rules. As a consequence, employers that sponsored group health coverage in 2014 need to confirm that their plan complied with the out-of-pocket maximum and other specified federal health plan rules or take timely action to self-assess, report on the Internal Revenue Service (IRS) Form 8928, and pay the $100 per day per violation penalty required by the Internal Revenue Code for 2014 when filing their 2014 business tax return.

    Adjusted Out-Of-Pocket Limit Amounts

    The ACA out-of-pocket maximum limitation is one of many broad health care reforms enacted by ACA. Under its provisions, federal law now limits the amount of the maximum deductible, co-payments or other cost sharing that most employer or union sponsored group health plans can impose on essential health benefits to the out-of-pocket limitation allowed by ACA § 1302(c)(1). See Public Health Service (PHS) Act §2707(b).

    The out-of-pocket limitations of $6,350 for individual only coverage and $12,700 for other than self-only coverage that first took effect with the 2014 plan year, are subject to annual adjustment for inflation under ACA §1302(c)(4) by the premium adjustment percentage beginning this plan year. The IRS recently announced the adjusted limitations that will apply to the 2015 and 2016 plan years. The applicable limits for 2014-2016 are as follows based on this guidance:

    Plan Year

    Individual Coverage Only

    Other Than Self-Only

    2014

    $6,350

    $12,700

    2015

    6,600

    13,200

    2016

    6,850

    13,700

    Since noncompliance with this limitation is one of a long list of federal health plan mandates that triggers a duty for the sponsoring employer to self-assess, report and pay an excise tax of $100 per day per violation for post-2013 plan years, employers that sponsored health plans in 2014 generally will want to verify that their plan complied with this out-of-pocket rule in 2014 and ensure that its 2015 plan has been updated to reflect the adjusted limit and otherwise comply with its requirements.

    In this respect, the final HHS Notice of Benefit and Payment Parameters for 2016 (2016 Payment Notice) clarifies that the self-only maximum annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or in coverage other than self-only.

    While employers can design their group health plans to apply higher out-of-pocket limitations on coverages for non-essential benefits and out-of-network care, plans designed to take advantage of this permitted distinction must be carefully administered to ensure that the limits allowed for non-essential benefits are not improperly applied to essential benefit coverages under the plan. Employers are cautioned to use care to avoid this from occurring by drafting the plan terms and requiring fiduciaries to administer the plan to ensure that:

    • The plan properly essential and non-essential health benefits, both in terms and in operation;
    • The limit is properly applied and calculated with respect to all benefits considered essential health benefits; and
    • The application of higher out-of-pocket limitations for non-essential benefits does not violate other federal health plan rules such as special federal health plan rules regarding out-of-network emergency care, mental health coverage parity, coverage for newborns and mothers, or the like.

    Ensure Plan Language & Operations Comply With Tri-Agency Out-Of-Pocket Guidance & Other Federal Health Plan Rules

    Updating the out-of-pocket maximum rules of a group health plan to comply with the ACA out-of-pocket maximum rule can be more complicated than many employers or plan fiduciaries might realize since the plan terms, and its administration must comply in form and operation with the regulations and other interpretations of the three agencies jointly responsible for administration and enforcement of this and various other federal health plan rules: the Departments of Health & Human Services (HHS), Internal Revenue Service (IRS), and Labor (DOL) (collectively, the “Tri-Agencies”).

    In the case of ACA’s out-of-pocket maximum rules, the Tri-Agencies already have supplemented the guidance in their implementing regulations by publishing a FAQ that gives additional clarification and examples that the Tri-Agencies intend to help explain the proper administration of the rule. Group health plans, their insurers or other fiduciaries, as well as sponsoring employers should take into account all of this existing guidance when reviewing and assessing the compliance of their group health plans, as well as stay vigilant for the publication of additional guidance.

    Existing guidance on the out-of-pocket maximum rule states that group health plans and insurance policies generally must count toward the out-of-pocket maximum limit all deductibles, coinsurance, copayments, or similar charges and any other expenditure the group health plan requires a covered person to pay for a qualified medical expense that is an “essential health benefit” within the meaning of ACA other than premiums, balance billing amounts for non-network providers and other out-of-network cost-sharing, or spending for non-essential health benefits.

    One of the first considerations should be to ensure that the plan document and parties responsible for administer it properly understand and apply the rule to all charges falling within coverage for “essential health benefits.” Technically, the out-of-pocket limitation only applies to coverage of “essential health benefits” within the meaning of ACA, in any group health plan, whether insured or self-insured. What benefits are considered “essential health benefits” is defined by Tri-Agency regulations. The definition of “essential health benefits” in these Tri-Agency regulations is complicated and generally varies by state, even when the group health plan is self-insured. Sponsors of self-insured group health plans and employers sponsoring plans covering individuals in different states generally will want to seek legal advice about the adequacy of their group health plan’s essential health benefit definition to make sure that these rules and their limitations are met.

    When applying these limits, employers, insurers, and administrators of group health plans attempting to distinguish non-essential health coverages such as prescription drug, behavior health, or dental coverages provided separately from otherwise applicable major medical coverage should consult with legal counsel to confirm that those arrangements comply with existing guidance on ACA’s out-of-pocket maximum and other federal mandates in form and operation. This analysis generally should both verify that the plan documents and administrative processes incorporate these requirements generally into the plan document as well as include provisions to ensure that these requirements are properly integrated with other federal mandates requiring cost-sharing for emergency care in the case of behavioral health coverage, the applicable federal mental health parity mandates, and other federal health plan rules. Special care and scrutiny should be applied if the group health plan uses multiple service providers to help administer benefits (such as one third-party administrator for major medical coverage, a separate pharmacy benefit manager, and a separate managed behavioral health organization).

    Special care also is needed if a group health plan uses separate plan service providers to administer the plan or certain of its provisions. Separate plan service providers may impose different levels of out-of-pocket limitations and may utilize different methods for crediting participants’ expenses against any out-of-pocket maximums. Administrators, insurers or other fiduciaries responsible for administration of these coverages must properly coordinate, and sponsoring employers should consult with legal counsel about auditing their plans for proper coordination of these processes across these different service providers.

    Along with making specific plan document and process changes to provide for proper implementation and administration of the out-of-pocket and other federal coverage and benefit mandates, all parties also should review the claims and appeals procedures used in connection with the processing and notification of covered persons about claims and appeals determinations made about denials to ensure that they fully comply with both the DOL’s reasonable claims and appeals regulations and, in the case of non-grandfathered health plans, ACA’s special independent review and other heightened requirements for administering and notifying covered persons or their beneficiaries about claim denials or appeals as any of these violations could trigger the obligation for the sponsoring employer to self-report on IRS Form 8928 and pay the $100 per day per violation ERISA liability for the plan and its fiduciaries, as well as other penalties under ERISA §502(c).

    Sponsoring Employers, Plan Fiduciaries and Vendors Should Act To Manage Exposures

    Since violations trigger substantial excise tax liability for the sponsoring employer, as well as expose the group health plan and its sponsor, members of management or others acting as fiduciaries to judgments, regulatory penalties, and associated investigation, defense settlement and other costs and disruptions, most sponsoring employers and their leaders generally will want to consult with qualified legal counsel knowledgeable about these health plan rules and their management about steps that they should take to prevent or mitigate legal and financial exposures that violations of the out-of-pocket maximum and other federal health plan mandates can trigger. Timely action generally both can help prevent future violations and their expensive redress and mitigate penalties and other exposures incurred for violations, if any, that may have or in the future inadvertently occur.

    As a part of these efforts, steps that plan sponsors and fiduciaries generally should take include.

    • Having plan documents and other plan materials and communications carefully review and drafted to meet mandates and mitigate risks;
    • Using care in when selecting and contracting with plan insurers or other vendors, by conducting appropriate documented review and credentialing of each vendor and its practices, as well as reviewing and negotiating administrative, insurance or other vendor agreements to appropriately name and allocate fiduciary status as well as include provisions requiring insurers, administrators and other group health plan vendors appropriately designate to provide contractual commitments that the policies and other plan documentation, systems and practices provided by the vendor are and will be administered in accordance with the out-of-pocket and other legal mandates, to provide certification of compliance and notice of violations, correction and indemnification of compliance deficiencies, and other related assurances and taking other documented prudent safeguards to require compliant practices;
    • Auditing as part of the vendor selection and renewal process and at other times throughout the year the operational compliance of the administration of the group health plan and taking corrective action as needed;
    • Ensuring that stop-loss, group or other insurance coverages are drafted to include catchall language to help ensure that the employer does not get left unexpectedly self-insuring the cost of funding benefits mandated by law that the carrier asserts fall outside the policy coverage because of gaps between drafting and the law;
    • Arranging for fiduciary liability, directors and officers or other coverage, indemnification from financially secure vendors, or other backup funding to help protect or mitigate the potential costs or liabilities that the sponsoring employer or its plan fiduciaries can expect to incur in the event of a challenge to the compliance of their group health plan or its practices; and
    • Learning and using appropriate processes to document prudent efforts to appropriately administer the plan in a compliant, legally defensible manner throughout the year.

    For Legal or Consulting Advice, Legal Representation, Training Or More Information

    If you need help reviewing your group health plan or responding to these new or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, help updating or defending your workforce or employee benefit policies or practices, or other related assistance, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

    Recognized as a “Top” attorney in employee benefits, labor and employment and health care law extensively involved in health and other employee benefit and human resources policy and program design and administration representation and advocacy throughout her career, Cynthia Marcotte Stamer is a practicing attorney and Managing Shareholder of Cynthia Marcotte Stamer, P.C., a member of Stamer│Chadwick│Soefje PLLC, author, pubic speaker, management policy advocate and industry thought leader with more than 27 years’ experience practicing at the forefront of employee benefits and human resources law.

    A Fellow in the American College of Employee Benefit Counsel, past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, an ABA Joint Committee on Employee Benefits Council Representative and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer is recognized nationally and internationally for her practical and creative insights and leadership on health and other employee benefit, human resources and insurance matters and policy.

    Ms. Stamer helps management manage. Ms. Stamer’s legal and management consulting work throughout her 27 plus year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

    Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce management operations and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy. Well known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes. Common engagements include internal and external workforce hiring, management, training, performance management, compliance and administration, discipline and termination, and other aspects of workforce management including employment and outsourced services contracting and enforcement, sentencing guidelines and other compliance plan, policy and program development, administration, and defense, performance management, wage and hour and other compensation and benefits, reengineering and other change management, internal controls, compliance and risk management, communications and training, worker classification, tax and payroll, investigations, crisis preparedness and response, government relations, safety, government contracting and audits, litigation and other enforcement, and other concerns.

    Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, ex-patriate and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

    Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas, Ms. Stamer annually leads the Joint Committee on Employee Benefits (JCEB) HHS Office of Civil Rights agency meeting and other JCEB agency meetings. She also works as a policy advisor and advocate to many business, professional and civic organizations.

    Author of the thousands of publications and workshops these and other employment, employee benefits, health care, insurance, workforce and other management matters, Ms. Stamer also is a highly sought out speaker and industry thought leader known for empowering audiences and readers. Ms. Stamer’s insights on employee benefits, insurance, health care and workforce matters in Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, Modern Healthcare, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications. Ms. Stamer also regularly serves on the faculty and planning committees for symposia of LexisNexis, the American Bar Association, ALIABA, the Society of Employee Benefits Administrators, the American Law Institute, ISSA, HIMMs, and many other prominent educational and training organizations and conducts training and speaks on these and other management, compliance and public policy concerns.

    Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see http://www.cynthiastamer.com or the Stamer│Chadwick │Soefje PLLC website or contact Ms. Stamer via email to here or via telephone to (469) 767-8872.

    About Solutions Law Press, Inc.™

    Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources at http://www.solutionslawpress.com such as:

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    ©2015 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™. All other rights reserved.


    Health Insurer/Vendor’s Claims & Appeals Deficiencies Could Trigger Significant Employer Excise Tax Liability

    July 27, 2015

    Employers sponsoring group health plan coverage now or in 2014, check the adequacy of your insurer or third party administrator’s claims and appeals processes and notices.  Employers that sponsor group health plans that violated certain health care reform mandates for claims and appeals imposed by the Patient Protection and Affordable Care Act (ACA) will face a duty to pay an excise tax of $100 per violation per day under the expanded Form 8928 filing requirements made applicable to employers providing health plan coverage after 2013 under the Internal Revenue Code (Code), as well undermine the enforceability of claims and appeals decisions under Section 502(b) and trigger penalties of $125 per day ($1000 per day in the case of Department of Labor enforcement actions) against the plan administrator under Section 502(c) of the Employee Retirement Income Security Act of 1974 (ERISA).

    Insurers and third party administrators providing claims and appeals services also should be concerned.  Not only could these vendors face liability under ERISA, employer hit with fees almost certainly will look to the vendors responsible for performing these services for indemnification or other relief.  Fixing past problems and preventing new violations is key to mitigating risks for all parties.

    Because of the potential legal risks under the Code and ERISA, employers evaluating compliance to determine whether to file a Form 8928 generally should consult with legal counsel about whether and how best to structure and conduct the health plan compliance review to preserve distinctions between their business operations and fiduciary activities performed on behalf of the plan, as well as any opportunities to use attorney-client privilege, work product or other evidentiary rules to mitigate their risks and exposures.

    Even before ACA, ERISA already required that group health plans and their plan administrators and fiduciary comply with a long list of highly technical rules when processing and administering claims and appeals and notifying plan members about these activities. The ACA claims and appeals rules covered by the Form 8928 filing and excise tax rules are additional notice and procedural safeguards imposed upon group health plans in addition to these long-standing ERISA claims and appeals procedures.  As implemented by current Department of Labor Regulations, these ACA claims and appeals procedures require that group health plans (other than grandfathered plans) both comply with:

    • All of the pre-existing ERISA claims and appeals rules; and
    • Notify members or their beneficiaries of their rights to and provide for independent review of coverage rescission decisions and medical judgment-based claims denials in accordance with detailed rules set forth in the Labor Department Regulations; and
    • Comply with tighter procedural and notice standards for processing claim and appeals imposed by ACA in accordance with the detailed rules set forth in the Labor Department Regulations.

    While most employers that sponsor group health plans historically have assumed that the insurers or other health plan vendors hired to administer their programs have designed and administer claims and appeals in compliance with these mandates, the processes and notices of many health plan insurers and self-insured plan claims and appeals vendors typically fall far short of meeting the requirements of even the pre-existing ERISA claims and appeals requirements as implemented by Labor Department Regulations since 2001, much less the additional independent review and other ACA claims and appeals requirements.

    Post-2013 deficiencies in the practices of many insurers and other health plan vendors’ claims and appeals processes and notifications now leave many employers exposed to significant excise tax penalties.  While under ERISA, group health plans and their responsible plan administrator or other applicable named fiduciary, not the sponsoring employer, generally bear the responsibility and liability for administering the group health plan in accordance with ACA’s claims and appeals and the other group health plan requirements covered by Form 8928, the Code’s extension of the Form 8928 filing requirement and imposition of significant excise taxes against employers that sponsor group health plans that violate these requirements is designed to give businesses sponsoring group health plans meaningful incentives to take steps to ensure that their group health plan is properly designed and administered by its insurers and fiduciaries to comply with the listed requirements.

    Under Code Section 6039D, businesses sponsoring group health plans are required to self-assess and pay excise taxes of up to $100 per day for each uncorrected violation of a specified list of federal health plan mandates by filing a Form 8928 when the business files its corporate or partnership tax return for the applicable taxable year.  Before 2014, the Form 8928 filing requirement applied to a fairly narrow set of requirements.  Beginning with 2014, however, ACA added the ACA claims and appeals rules as well as a long list of other ACA requirements to the health plan violations subject to Form 8928 disclosures and excise taxes. If a business sponsored a health plan that violated the ACA claims and appeals rules or any other health plan rule subject to the Form 8928 filing requirement in 2014 or thereafter, the business should take prompt, well-documented actions to self-correct the violation or timely must file the required Form 8929 and pay the applicable $100 per violation per day excise tax since proof of good faith efforts to maintain compliance, proof of self-correction, or both may mitigate these excise tax and other Form 8928 liability as well as associated ERISA exposures.  Likewise, during the current and future years after 2013, businesses offering group health plan coverage to their employees  also will want to monitor their health plan’s compliance with the federal group health plan rules  covered by Form 8929 reporting to avoid or mitigate these risks going forward.

    Since federal group health plan violations that trigger the Form 8928 requirement of a sponsoring employer also generally create potential exposures for the ERISA exposures for the group health plan, parties acting as the “plan administrator” or other “fiduciary” role with respect to the plan or both under ERISA, the group health plan and its plan administrator or other responsible fiduciary (sometimes, but not always the employer or a member of its management), the group health plan, and those parties acting as the plan administrator or fiduciary responsible for administering the plan in compliance with those requirements also will want to be prepared to demonstrate that prudent steps are taken to administer the group health plan in accordance with the applicable mandates, including prudently to investigate and redress any suspected concerns identified in connection with the employer’s Form 8928 filing analysis.  Under ERISA, for instance, the group health plan’s failure to strictly comply with any one of the highly technical claims or appeals procedural or notification requirements of ACA can give the affected plan member or its assignee the ability to sue the group health plan without the need to fulfill otherwise applicable appeals or other procedures that otherwise might apply under the group health plan’s claims and appeals procedures as well as have other adverse consequences for the group health plan or its fiduciaries, may heightened the burdens of proof the plan or its fiduciaries must meet to sustain denial determinations, or both.  In addition, where the ACA violation included a failure to comply with ACA’s claims or appeals notification requirements, the violation also could provide the basis for the plan member to ask a court to order the plan administrator to pay the plan member up to  $125 per day per violation plus attorneys’ fees and enforcement costs, the basis for the Department of Labor to penalize the plan administrator up to $1025 per day per violation per plan member, or both.   While technically these ERISA exposures generally run specifically to the plan or the party serving as its plan administrator or responsible fiduciary, the employer frequently ultimately pays for these liabilities either because:

    • The plan documentation names the sponsoring business as the plan administrator or named fiduciary responsible for these actions;
    • The vendor agreement between the sponsoring business and the insurer or other service provider that the business hired to perform these duties requires the sponsoring business to indemnify the vendor for these liabilities; or
    • Both.

    While the sponsoring business and parties serving as the plan administrator or other fiduciaries of the plan all have potential legal risk if the plan is not administered in accordance with the ACA claims and appeals procedures or other requirements covered by the Form 8928 filing requirements, all parties need to be mindful of the distinctions between the Form 8928 and other exposures that a sponsoring employer bears under the Code as compared to the ERISA fiduciary responsibility and other duties imposed upon the plan and its fiduciaries under ERISA.  Maintenance of proper separation between these roles and appropriate structuring of communications between the sponsoring business with the plan and its fiduciaries and vendors is important to minimize the risk that the sponsoring business unintentionally will create or broaden the fiduciary liability exposures of the business by unnecessarily or inappropriately exercising discretion or control over the administration of plan duties that the plan terms allocate to other parties.  Also, plan sponsors engaging in compliance reviews and associated discussions generally have a greater ability to use attorney-client privilege and work product than plan fiduciaries.  Accordingly, businesses sponsoring their group health plans and their management generally will want to consult with qualified, experienced legal counsel for advice about whether and how to structure their Form 8928 assessments and associated risk analysis and correction discussions to promote and preserve the ability of the business, as the sponsoring employer, and its management to minimize ERISA fiduciary exposures and claim and use attorney-client privilege and work product evidentiary privileges to contain the scope of ERISA associated risks.

    Going forward, businesses also will want to obtain advice of counsel about opportunities to mitigate Form 8928, ERISA and other exposures through more careful credentialing and contracting with health plan insurers and vendors, review and drafting of plan documents, summary plan descriptions and other plan materials, and other risk management and compliance processes and procedures. See Careful Selection & Contracting With Vendors Critical Part of Health Plan Renewals

    While most employers will not be able to negotiate the ideal contractual provisions and all operational violations, careful plan drafting to comply with applicable rules, vendor credentialing and contracting, and monitoring of compliance by an employer can reduce the risk and frequencies of violation and promote timely self-correction.  In addition, the documented administration of these and other efforts by the employer can provide invaluable evidence to position the sponsoring employer to minimize or secure a waiver of excise taxes that otherwise might arise under the Code, pursue indemnification for liabilities the employer incurs due to the misfeasance of the insurer or vendor or both.

    For Help or More Information

    For Legal or Consulting Advice, Legal Representation, Training Or More Information

    If you need help responding to these new or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, help updating or defending your workforce or employee benefit policies or practices, or other related assistance, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

    A practicing attorney and Managing Shareholder of Cynthia Marcotte Stamer, P.C., a member of Stamer│Chadwick │Soefje PLLC, Ms. Stamer’s more than 27 years’ of leading edge work as an practicing attorney, author, lecturer and industry and policy thought leader have resulted in her recognition as a “Top” attorney in employee benefits, labor and employment and health care law.

    Board certified in labor and employment law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, an ABA Joint Committee on Employee Benefits Council Representative and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer is recognized nationally and internationally for her practical and creative insights and leadership on HIPAA and other health and other employee benefit, human resources, and related insurance, health care, privacy and data security and tax matters and policy.

    Ms. Stamer’s legal and management consulting work throughout her 27 plus year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

    Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce management operations and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

    Well known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes.

    As a key part of this work, Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements.

    She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, ex-patriate and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. In these and other engagements, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

    In the course of this work, Ms. Stamer has accumulated an impressive resume of experience advising and representing clients on HIPAA and other privacy and data security concerns. The scribe for the American Bar Association (ABA) Joint Committee on Employee Benefits annual agency meeting with the Department of Health & Human Services Office of Civil Rights for several years, Ms. Stamer has worked extensively with health plans, health care providers, health care clearinghouses, their business associates, employer and other sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA and other information privacy and data security rules, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and enforcement, and a host of other related concerns. Her clients include public and private health plans, health insurers, health care providers, banking, technology and other vendors, and others. Beyond advising these and other clients on privacy and data security compliance, risk management, investigations and data breach response and remediation, Ms. Stamer also advises and represents clients on OCR and other HHS, Department of Labor, IRS, FTC, DOD and other health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She also is the author of numerous highly acclaimed publications, workshops and tools for HIPAA or other compliance including training programs on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

    Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas. She also works as a policy advisor and advocate to health plans, their sponsors, administrators, insurers and many other business, professional and civic organizations.

    Author of the thousands of publications and workshops these and other employment, employee benefits, health care, insurance, workforce and other management matters, Ms. Stamer also is a highly sought out speaker and industry thought leader known for empowering audiences and readers. Ms. Stamer’s insights on employee benefits, insurance, health care and workforce matters in Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, Modern Healthcare, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications. Ms. Stamer also regularly serves on the faculty and planning committees for symposia of LexisNexis, the American Bar Association, ALIABA, the Society of Employee Benefits Administrators, the American Law Institute, ISSA, HIMMs, and many other prominent educational and training organizations and conducts training and speaks on these and other management, compliance and public policy concerns.

    Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see www.cynthiastamer.com, or http://www.stamerchadwicksoefje.com the member of contact Ms. Stamer via email here or via telephone to (469) 767-8872.

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