By: Richard T. Kennedy, Esquire rtk@muslaw.com
Background
Under COBRA, most group health plans are required to provide a qualified beneficiary (employee, spouse or dependent) with an opportunity to continue health coverage when a qualifying event would result in the loss of coverage. Qualified beneficiaries have been required to pay the full cost of COBRA coverage.
Beginning generally March 1, 2009, a temporary subsidy is available for COBRA coverage provided because of an involuntary termination of employment from September 1, 2008 through December 31, 2009, but excluding high income individuals. Under the subsidy, an eligible individual pays 35% of the COBRA premium. The employer (in most cases) pays the remaining 65% and is reimbursed by the government for this cost by a payroll tax credit.
The Internal Revenue Service (IRS) has issued guidance in Notice 2009-27, available at www.irs.gov. The Department of Labor (DOL) has issued model notices and guidance, available at www.dol.gov/ebsa/COBRA.html. This update highlights certain key guidance.
Eligibility
The COBRA premium subsidy is available only if the loss of health coverage is due to an involuntary termination of employment. This is generally defined as a severance of employment by the employer, other than at the request of the employee, where the employee is willing and capable of performing services. This seemingly simple definition is subject to much additional guidance in the IRS Notice.
Both the involuntary termination of employment and the loss of coverage must occur during the September 1, 2008 through December 31, 2009 period. Extended health coverage provided by an employer after a termination of employment and continuing after December 31, 2009 may disqualify an individual for the subsidy, depending upon how the coverage is characterized for COBRA purposes.
A spouse or dependent not covered by a group health plan at an employee's termination of employment is not a qualified beneficiary, and if added later to the COBRA coverage, will not be eligible for the subsidy (except for a child born to or placed for adoption with the employee during COBRA coverage).
Amount of Reduced COBRA Premium and Credit
The reduced 35% COBRA premium and the 65% payroll tax credit are based on the COBRA premium otherwise payable. If an employer pays part or all of the COBRA premium, the employer cannot take full advantage of the available payroll tax credit. The employer may increase the COBRA premium in such case and receive a payroll tax credit based on the increased premium. The employer may reimburse the employee for the increased cost by a separate taxable payment.
End of Subsidy
The COBRA premium subsidy is available for 9 months. It will end earlier if the individual becomes eligible for other group health plan coverage or Medicare coverage, even if the individual does not enroll. The individual is not considered to be eligible for other coverage during any waiting period.
The death of an involuntarily terminated employee does not terminate the eligibility of a spouse or dependent child for the subsidy.
Second COBRA Election
A second COBRA election must be given if health coverage is lost due to an involuntary termination of employment from September 1, 2008 through February 17, 2009 and no election of COBRA coverage is in effect on February 17, 2009. A 60-day election period must be provided. If elected, the coverage is generally effective March 1, 2009, but will not extend the otherwise applicable 18-month period.
DOL Model Notices
Notices explaining the premium subsidy and (if applicable) the second COBRA election must be provided to qualified beneficiaries who lost or lose health coverage from September 1, 2008 through December 31, 2009. The DOL has issued model election notices with election and notification forms.
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This update is intended to provide information of general interest to the public and is not intended to offer legal advice. It may be reproduced with the prior permission of Meyer, Unkovic & Scott and acknowledgement of its source and copyright.
Thursday, June 11, 2009
Thursday, April 16, 2009
Nix Boss-Employee Dating
By: Elaina Smiley, Esquire es@muslaw.com
Recent studies show that many people meet their significant other in the workplace. But if the dating relationship is between a supervisor and a subordinate, it can be a source of problems in the workplace.
Some thorny issues arise when a supervisor is romantically involved with someone who works for him or her, including:
Recent studies show that many people meet their significant other in the workplace. But if the dating relationship is between a supervisor and a subordinate, it can be a source of problems in the workplace.
Some thorny issues arise when a supervisor is romantically involved with someone who works for him or her, including:
- The reaction of other employees. Other employees may suspect favoritism or resent any advancement the supervisor gives to the “favored” subordinate, even if it was legitimately earned. These feelings could blossom into race, age, gender or other discrimination claims, which could prove costly to the company.
- Interference with the supervisor’s ability to manage. A supervisor may feel unable to give a frank performance appraisal to a subordinate with whom he or she is or has ever been personally involved. A supervisor may share confidential or proprietary information about the company with the subordinate.
- The fallout when the relationship turns sour. The end of the relationship often puts the supervisor and the company in a no-win situation. For instance, many sexual harassment claims are filed when a relationship ends. Furthermore, the parties involved in the relationship may engage in personal arguments and confrontations in the workplace. A former boyfriend or girlfriend may interpret any subsequent negative action taken against them as retaliatory, which could lead to a claim of discrimination or harassment.
An employer has the right to set a policy that prohibits dating between coworkers, but in this day and age, it may feel reluctant to do so. At the very least, however, employers would be wise to prohibit dating between supervisors and subordinates and remind all employees that professional conduct will be required at all times within the workplace.
EMPLOYMENT AGENCIES AND EMPLOYEE CONFIDENTIALITY POLICIES
By: Jane Lewis Volk, Esquire jlv@muslaw.com
A federal appeals court recently affirmed an order of the National Labor Relations Board granting reinstatement and back pay to an employee of a temporary employment agency who had been discharged pursuant to an employee confidentiality agreement which was held to be unlawful under the National Labor Relations Act (“NLRA”). (Northeastern Land Service v. NLRB, U.S. Court of Appeals for the First Circuit, decided March 13, 2009.)
The agency required their employees to sign an employment agreement containing a confidentiality clause prohibiting them from disclosing the terms of their employment to “other parties.” In this case, the employee had complained about his wages to the company where he was assigned (the client of the employment agency). He was fired for violation of the confidentiality clause.
The NLRA protects employees’ rights to freely discuss the terms and conditions of their employment among themselves (yes, even in non-union settings). This disclosure was not to a fellow employee as anticipated by the NLRA, but to the client. However, the NLRB and the court of appeals reasoned that the confidentiality agreement would chill those free discussion rights and thus was an unlawful agreement. Any firing under that policy was therefore violative of the NLRA.
While you undoubtedly do not want the individuals whom you place with your clients to be complaining in their workplaces about the terms of their employment, making them sign such a confidentiality agreement is not the way to go. The other important message from this decision is a reminder that the NLRA applies to non-union employers, contrary to conventional wisdom (which is so often wrong).
A federal appeals court recently affirmed an order of the National Labor Relations Board granting reinstatement and back pay to an employee of a temporary employment agency who had been discharged pursuant to an employee confidentiality agreement which was held to be unlawful under the National Labor Relations Act (“NLRA”). (Northeastern Land Service v. NLRB, U.S. Court of Appeals for the First Circuit, decided March 13, 2009.)
The agency required their employees to sign an employment agreement containing a confidentiality clause prohibiting them from disclosing the terms of their employment to “other parties.” In this case, the employee had complained about his wages to the company where he was assigned (the client of the employment agency). He was fired for violation of the confidentiality clause.
The NLRA protects employees’ rights to freely discuss the terms and conditions of their employment among themselves (yes, even in non-union settings). This disclosure was not to a fellow employee as anticipated by the NLRA, but to the client. However, the NLRB and the court of appeals reasoned that the confidentiality agreement would chill those free discussion rights and thus was an unlawful agreement. Any firing under that policy was therefore violative of the NLRA.
While you undoubtedly do not want the individuals whom you place with your clients to be complaining in their workplaces about the terms of their employment, making them sign such a confidentiality agreement is not the way to go. The other important message from this decision is a reminder that the NLRA applies to non-union employers, contrary to conventional wisdom (which is so often wrong).
Employers Not Covered by FMLA May be Obligated to Follow FMLA Based on Handbook Provisions
By: Elaina Smiley, Esquire es@muslaw.com
Does your company have a Family and Medical Leave Act (“FMLA”) policy when you do not have 50 or more employees? If you do, you may be at risk for giving your employees rights under FMLA that your company would not otherwise be obligated to follow. Typically, FMLA applies only to employers who employ at least 50 employees within a 75 mile radius. An employee can be eligible for FMLA if he or she has worked for a Company for a total of 12 months and for at least 1,250 hours in the previous 12 months.
In a recent decision issued on March 10, 2009, Reaux v. Infohealth Management filed in the Northern District of Illinois, the Court denied an employer’s motion to dismiss an employee’s FMLA claim because of promises that were made to its employees in a handbook. In the case, both parties admitted that the employer did not have 50 or more employees in a 75 mile radius. However, the Plaintiff argued that the employer was estopped from denying her FMLA leave based on provisions contained in the handbook. The handbook contained a FMLA policy that defined "eligible employees" as those having worked for the company for at least 12 months and 1,250 hours during the 12 months preceding the leave. The policy promised that eligible employees "shall be entitled" to FMLA leave for the birth of a child. In addition, the employee’s supervisor told her that she would be “entitled” to leave if she filled out the FMLA paperwork. The employee completed the necessary paperwork, took leave for the birth of her child and was fired a few days prior to the expiration of her 12 weeks of approved leave. The policy did not contain a provision that stated that FMLA coverage was only applicable to those employees who worked at a location with 50 or more employees in a 75 mile radius. The court permitted the employee to proceed on her FMLA claim.
Although this case is not precedential in Pennsylvania, employers should be very cautious in how they draft their handbooks and policies. Giving employees rights under FMLA means that the company may be obligated to hold open the employee’s position for 12 weeks while the employee is on leave and be obligated to restore an employee to his or her original job, or to an equivalent job with equivalent pay, benefits, and other terms and conditions of employment. Furthermore, employers could bind themselves to other provisions of FMLA such as providing intermittent leave in accordance with the Act and providing group health plan insurance to employees on leave. Employers should review their handbooks to ensure that their policies are not creating unintended consequences and are in compliance with current changes to employment laws.
Does your company have a Family and Medical Leave Act (“FMLA”) policy when you do not have 50 or more employees? If you do, you may be at risk for giving your employees rights under FMLA that your company would not otherwise be obligated to follow. Typically, FMLA applies only to employers who employ at least 50 employees within a 75 mile radius. An employee can be eligible for FMLA if he or she has worked for a Company for a total of 12 months and for at least 1,250 hours in the previous 12 months.
In a recent decision issued on March 10, 2009, Reaux v. Infohealth Management filed in the Northern District of Illinois, the Court denied an employer’s motion to dismiss an employee’s FMLA claim because of promises that were made to its employees in a handbook. In the case, both parties admitted that the employer did not have 50 or more employees in a 75 mile radius. However, the Plaintiff argued that the employer was estopped from denying her FMLA leave based on provisions contained in the handbook. The handbook contained a FMLA policy that defined "eligible employees" as those having worked for the company for at least 12 months and 1,250 hours during the 12 months preceding the leave. The policy promised that eligible employees "shall be entitled" to FMLA leave for the birth of a child. In addition, the employee’s supervisor told her that she would be “entitled” to leave if she filled out the FMLA paperwork. The employee completed the necessary paperwork, took leave for the birth of her child and was fired a few days prior to the expiration of her 12 weeks of approved leave. The policy did not contain a provision that stated that FMLA coverage was only applicable to those employees who worked at a location with 50 or more employees in a 75 mile radius. The court permitted the employee to proceed on her FMLA claim.
Although this case is not precedential in Pennsylvania, employers should be very cautious in how they draft their handbooks and policies. Giving employees rights under FMLA means that the company may be obligated to hold open the employee’s position for 12 weeks while the employee is on leave and be obligated to restore an employee to his or her original job, or to an equivalent job with equivalent pay, benefits, and other terms and conditions of employment. Furthermore, employers could bind themselves to other provisions of FMLA such as providing intermittent leave in accordance with the Act and providing group health plan insurance to employees on leave. Employers should review their handbooks to ensure that their policies are not creating unintended consequences and are in compliance with current changes to employment laws.
Wednesday, March 25, 2009
Stimulus Law Provides Cobra Subsidy
By: Richard T. Kennedy, Esquire - rtk@muslaw.com
The American Recovery and Reinvestment Act of 2009 was signed into law on February 17, 2009. Among other things, the Act provides a subsidy for COBRA premiums. The subsidy generally takes effect on March 1, 2009 and requires immediate action by employers and COBRA administrators. Some key points follow.
Subsidy
The subsidy is a 65% reduction in the amount of the premium an eligible individual is required to pay for up to 9 months of COBRA continuation coverage. An eligible individual will pay 35% of the COBRA premium to the employer, health plan or insurer. The employer, health plan or insurer pays the remaining 65% of the COBRA premium and is reimbursed in the form of a credit against the payroll taxes (income tax withholding and FICA taxes) the employer, health plan or insurer is required to pay to the Treasury Department.
Eligible Individuals
An eligible individual is an employee whose employment involuntarily terminates from September 1, 2008 through December 31, 2009 with eligibility for COBRA coverage along with that employee's spouse and dependents eligible for COBRA coverage. Under a means test, an individual with adjusted gross income of more than $145,000 ($290,000 for joint filers) is not eligible for the subsidy, and an individual with adjusted gross income between $125,000 and $145,000 ($250,000 to $290,000 for joint filers) is eligible for a reduced subsidy. An individual is permitted to permanently waive the subsidy.
Second Election
An eligible individual whose employment involuntarily terminated on or after September 1, 2008 and before February 17, 2009 and who declined to elect COBRA coverage is required to be provided with another COBRA election. Any COBRA coverage elected will be effective with the first coverage period after February 17, 2009, which typically would be March 1, 2009. This election would not extend the total period of otherwise available COBRA coverage.
New Notice Requirements
Notices explaining the new subsidy provisions and other COBRA provisions in the Act will have to be provided to qualified beneficiaries who lose coverage on or after September 1, 2008 and before 2010. Individuals who became entitled to elect COBRA coverage before the February 17, 2009 enactment date must be provided with new notices within 60 days of the enactment date. The Department of Labor has been directed to issue a model notice within 30 days of the enactment date.
Quick Action
- The Act provides little time for implementation. Employers and health plans should consider the following steps:
- Developing the procedures to identify eligible individuals whose COBRA qualifying event was an involuntary termination of employment.
- Identifying COBRA qualified beneficiaries who lost coverage from and after September 1, 2008 so that they may be properly notified of the new COBRA provisions.
- Working with COBRA administrators/vendors to review capabilities and modify existing COBRA notices and procedures and with payroll administrators/vendors to develop reporting and reimbursement mechanisms.
- Reviewing existing documents and plan descriptions for necessary revisions.
Please contact Richard T. Kennedy at (412) 456-2880 or rtk@muslaw.com for additional information.
This Meyer, Unkovic & Scott update is intended to provide information of general interest to the public and is not intended to offer legal advice. Meyer, Unkovic & Scott does not intend to create an attorney-client relationship by providing this information. Readers should consult with counsel before acting upon this information.
Two Recent Laws Relating to Employee Health Care: The New Mental Health Parity Act and Michelle’s Law
By: Antoinette C. Oliver, Esquire aco@muslaw.com and Quinn A. Johnson, Esquire qaj@muslaw.com
Employers should be aware of two recently enacted federal laws which relate to to employee health care. First, the new federal Mental Health Parity Act (the “Act”) was passed by Congress as part of the economic bail-out plan on October 3, 2008. The law seeks to bring parity to insurance coverage for treatment of mental health and mental illness (including substance abuse), as compared to that of physical aliments. The Act applies only to those enrolled in a group health plan of 50 of more employees that already provides benefits for both physical and mental health disorders. Under the new law, such insurance plans are prohibited from providing different deductibles, copayments, or limiting frequency of treatment and days of coverage for mental health care, as compared to physical ailment care. Mental health or substance use benefit coverage is not required, but if such coverage is offered it must be provided at parity. For most employers affected by the Act, the new law took effect on January 1, 2009.
Second, Congress has finally closed a health insurance loophole on whether dependent college students can lose medical coverage for taking time off from school for medical reasons. While most employee health plans only cover dependents over age 18 if they are full-time students (and under a certain age), a new federal law will protect dependent college students from losing their health insurance in the event of serious medical illness. “Michelle’s Law,” signed by President Bush on October 9, 2008, amends the Employee Retirement Income Security Act of 1974, the Public Health Service Act and the Internal Revenue Code of 1986 to allow full-time college students to take a year of medical leave without the risk of losing their insurance. The law will become effective in October 2009. The law does not compel insurance companies to cover any new individuals, but prevents them from dropping coverage under these circumstances.
Second, Congress has finally closed a health insurance loophole on whether dependent college students can lose medical coverage for taking time off from school for medical reasons. While most employee health plans only cover dependents over age 18 if they are full-time students (and under a certain age), a new federal law will protect dependent college students from losing their health insurance in the event of serious medical illness. “Michelle’s Law,” signed by President Bush on October 9, 2008, amends the Employee Retirement Income Security Act of 1974, the Public Health Service Act and the Internal Revenue Code of 1986 to allow full-time college students to take a year of medical leave without the risk of losing their insurance. The law will become effective in October 2009. The law does not compel insurance companies to cover any new individuals, but prevents them from dropping coverage under these circumstances.
Common Mistakes To Avoid in Layoffs and Terminations
By: Elaina Smiley, Esquire es@muslaw.com
In these tough economic times, many employers are looking for methods to cut costs to keep their businesses viable. Unfortunately, cost cutting often involves terminating or laying off workers. A business that is considering reducing its workforce needs to take preventative measures to reduce liability. Employers should avoid the following pitfalls when performing layoffs:
1. Not Analyzing the Demographics of Employees Selected.
During layoffs, employers must consider the impact that the reduction will have on employees in protected classifications such as age (40 and over), gender, race, color, religion, national origin, disability or other protected classification. For example, an employer selects a female age 55 with 15 years of service for termination but retains a white male age 25 with two years of service in the same position. Without good documentation of performance issues for the female selected, she may have a claim against the company for age and gender discrimination.
2. Not Being Truthful With Employees About the Reasons for Selection.
Employers must be honest with employees regarding the reasons for termination. If an employee is selected because he/she has performance issues, the company should tell the employee about the issues. Often those making the termination decisions want to spare the employee any hard feelings and do not address the performance problems as the reason for termination. This approach can harm the company if the employee files a claim. A good defense to a discrimination claim is that the decision to terminate the employee was not based on a protected classification, but rather was based on the employee’s poor performance. If the company does not tell the employee about the performance issues then the company may be viewed as not being truthful and this undercuts the company’s defense.
3. Offering Severance Payments Without Getting a Release of Claims.
Another mistake that companies often make is to offer severance payments without getting a release of claims. If a company is terminating an employee and pays money for which the employee is not otherwise entitled, it is wise to get a proper release of claims when the employee is in a protected classification or may have claim against the company. Securing a release in exchange for a monetary payment will reduce the potential for future claims.
4. Failing to Give the Statutorily Required Time Periods for Consideration and Revocation of Releases.
Employers who offer severance to employees in exchange for a release of claims must adhere to all employment laws in order to properly secure a release of claims. For example, under the Age Discrimination in Employment Act, in order to properly release an age discrimination claim, the release must give the employee 21 days to review the agreement and 7 days to revoke the agreement after the employee signs. In other situations where there are multiple layoffs with a severance payment, the release must provide the employee 45 days to review the agreement with 7 days to revoke after signing. Furthermore, when an company has multiple layoffs involving a release agreement, the employer must provide employees a list of the job titles and ages of all individuals selected for termination and the ages of all individuals in the same job classification or organizational unit who are not selected.
5. Not Properly Paying Out Wages Upon Termination
Finally, when employees are terminated, the employer must pay out all wages, vacation pay and commissions that are considered earned. Failure to properly pay earned wages can result in a claim under Pennsylvania Wage Payment and Collection Law and other employment laws.
Please contact Elaina A. Smiley at (412) 456-2821 or es@muslaw.com for additional information.
1. Not Analyzing the Demographics of Employees Selected.
During layoffs, employers must consider the impact that the reduction will have on employees in protected classifications such as age (40 and over), gender, race, color, religion, national origin, disability or other protected classification. For example, an employer selects a female age 55 with 15 years of service for termination but retains a white male age 25 with two years of service in the same position. Without good documentation of performance issues for the female selected, she may have a claim against the company for age and gender discrimination.
2. Not Being Truthful With Employees About the Reasons for Selection.
Employers must be honest with employees regarding the reasons for termination. If an employee is selected because he/she has performance issues, the company should tell the employee about the issues. Often those making the termination decisions want to spare the employee any hard feelings and do not address the performance problems as the reason for termination. This approach can harm the company if the employee files a claim. A good defense to a discrimination claim is that the decision to terminate the employee was not based on a protected classification, but rather was based on the employee’s poor performance. If the company does not tell the employee about the performance issues then the company may be viewed as not being truthful and this undercuts the company’s defense.
3. Offering Severance Payments Without Getting a Release of Claims.
Another mistake that companies often make is to offer severance payments without getting a release of claims. If a company is terminating an employee and pays money for which the employee is not otherwise entitled, it is wise to get a proper release of claims when the employee is in a protected classification or may have claim against the company. Securing a release in exchange for a monetary payment will reduce the potential for future claims.
4. Failing to Give the Statutorily Required Time Periods for Consideration and Revocation of Releases.
Employers who offer severance to employees in exchange for a release of claims must adhere to all employment laws in order to properly secure a release of claims. For example, under the Age Discrimination in Employment Act, in order to properly release an age discrimination claim, the release must give the employee 21 days to review the agreement and 7 days to revoke the agreement after the employee signs. In other situations where there are multiple layoffs with a severance payment, the release must provide the employee 45 days to review the agreement with 7 days to revoke after signing. Furthermore, when an company has multiple layoffs involving a release agreement, the employer must provide employees a list of the job titles and ages of all individuals selected for termination and the ages of all individuals in the same job classification or organizational unit who are not selected.
5. Not Properly Paying Out Wages Upon Termination
Finally, when employees are terminated, the employer must pay out all wages, vacation pay and commissions that are considered earned. Failure to properly pay earned wages can result in a claim under Pennsylvania Wage Payment and Collection Law and other employment laws.
Please contact Elaina A. Smiley at (412) 456-2821 or es@muslaw.com for additional information.
This Meyer, Unkovic & Scott update is intended to provide information of general interest to the public and is not intended to offer legal advice. Meyer, Unkovic & Scott does not intend to create an attorney-client relationship by providing this information. Readers should consult with counsel before acting upon this information.
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