Employment & Labor Updates | Summer 2013
By Karen Kalzer, Jonathan Minear and Lauren Parris
Delays in Affordable Health Care Act (ACA)
Employers will not be subject to a penalty if their full time employees (and their dependents) receive a tax credit to obtain health care insurance through an Affordable Insurance Exchange in 2014. The US Dept. of Treasury announced on July 2 that the administration “will provide an additional year before the ACA mandatory employer and insurer requirements begin.”
The delay occurred because the proposed rules implementing these provisions have not yet been released although they are expected to be announced “this summer.”
The delay will limit the availability of information about employees’ access to employer-sponsored coverage. Because of this, the administration stated that it will simultaneously delay application of the penalties associated with the employer shared responsibility requirements under the ACA (also referred to as “the employer mandate.”) The Treasury blog post also announced that “[w]e recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments (under section 4980H) for 2014. Accordingly, we are extending this transition relief to the employer shared responsibility payments. These payments will not apply for 2014. Any employer shared responsibility payments will not apply until 2015.”
The Treasury Department clarifies that this delay does “not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA).
The Administration has not yet published regulatory guidance setting forth the exact parameters of the delay, but has indicated such formal guidance will be available “[w]ithin the next week.” Employers should review the forthcoming guidance(s) and consult with counsel prior to taking any further actions.
Three Things Washington Employers Need to Know Now
The past several months have brought forth important new rights and responsibilities for Washington employers to consider in their day to day supervision as well as in handbooks and policy manuals.
How does the new marijuana legislation affect my right to test and discharge?
With Washington’s recent legalization of recreational marijuana use, employers are all curious about how marijuana will be treated in the workplace. The good news is that from hiring decisions to firing decisions it is unlikely that the new law will have any substantial impact on employer rights in the workplace. Like with medicinal marijuana law, the recreational marijuana law does not regulate the conduct of a private employer or protect an employee from being discharged because of marijuana use. Washington employers may still lawfully refuse to hire an applicant who tests positive for marijuana, even though its use is legally authorized under state law. Also, employers may prohibit employees from using marijuana during work hours or on work premises, possessing marijuana in the workplace, or working while under the influence of marijuana.
In fact, there are sound reasons for many employers to continue regulation of employee marijuana use. Because marijuana is still illegal under the federal Controlled Substances Act, Washington employers who receive federal funding are required under the Drug-Free Workplace Act (DFWA) to provide a drug-free workplace as a condition of that funding. Additionally, allowing employees to work under the influence of marijuana presents workplace safety issues as well as potential employer liability. Employers should implement clear policies addressing marijuana use and possession and seek legal counsel to review such policies for compliance with federal and state law.
What employee social media can I access under the new laws?
Governor Inslee recently signed into law a bill tightening the social media privacy rights of employees and job applicants. The new law makes it unlawful for employers to require an individual to give access to his or her social networking account as a condition of employment. Other prohibited employer conduct includes requesting the individual’s passwords, compelling the individual to “add” the employer to the list of contacts, or making the individual change his or her privacy settings to allow third-party viewing.
Good news for employers, the statute does not cover employee information in the public domain, nor does it cover computer, phones or PDAs paid for or supplied by the employer. Additionally, as a carve-out exception, employers are allowed to undertake an investigation in response to a tip about potential legal violations, work-related employee misconduct, or misappropriation of certain employer information so long as the employer does not ask for login information.
Employers who engage in activities in violation of this new law may be liable for a $500 penalty fee as well as actual damages, attorney’s fees and costs. Therefore, it is important to review the new law and update social media policies and practices.
What do the new background check restrictions require of me in hiring new employees?
On June 20, 2013, Seattle Mayor McGinn signed a city ordinance restricting private employers’ ability to screen jobs applicants with criminal background checks. Under this new ordinance, such employers may no longer ask about an applicant’s criminal history at the initial screening. This ordinance also prohibits employers from taking adverse employment action against job applicants or employees based on their criminal conduct, except when such conduct (1) will negatively impact their ability to perform the work, or (2) will harm or cause injury to people, property, business reputation, or business assets.
This ordinance is set to take effect on November 1, 2013, and it applies to private employers hiring for positions requiring at least 50 percent of working time in Seattle. However, this ordinance does not apply to jobs in specific fields, including law enforcement and security, or to jobs that may have unsupervised access to children, developmentally disabled persons, or vulnerable adults.
Readers should take note of the following important provisions:
- Employers cannot ask about an applicant’s criminal background until after the initial screening to eliminate unqualified applicants.
- Employers cannot take adverse employment action based exclusively on an employee’s or applicant’s arrest record.
- Employers cannot take adverse employment action based on an employee’s or applicant’s pending criminal charges, conviction record, or conduct related to an arrest, unless the employer has a “legitimate business reason” for taking such action and considers several factors relating to the specific criminal background, job in question, and individual applicant. A “legitimate business reason” is a good faith belief that the criminal conduct or pending charge will (1) have a negative impact on the employee’s or applicant’s ability to perform the work, or (2) harm or cause injury to people, property, business reputation, or business assets.
- Prior to taking any adverse action based exclusively on an employee’s or applicant’s criminal conduct or pending charge, an employer must inform him or her of the reason and give him or her a reasonable opportunity to explain or correct that information. When hiring for an open position, the employer must also hold the position open for two days to give the applicant or current employee a reasonable opportunity to respond, correct, or explain that information.
- This ordinance prohibits any retaliation against an employee or applicant because he or she has filed a complaint in good faith about any employer’s alleged violation, or has cooperated in the resulting investigation.
- The ordinance does not create a private right of action. Instead, the Seattle Office of Civil Rights has enforcement authority and may initiate investigations of alleged violations on its own—without any complaint that this ordinance was violated. The agency may impose fines of between $750 and $1,000 for each offense, plus the agency’s attorney fees.
The full text of this ordinance can be found here.
- Determine whether the Seattle ordinance applies to you
- Review job descriptions and revise accordingly
- Amend employment applications that screen re criminal background
Recent Supreme Court Decisions Impacting Washington Employers
As the 2012 term drew to a close, the United States Supreme Court issued a series of decisions of which Washington employers should be aware.
Title VII decisions
The Court decided two Title VII cases involving claims of discrimination and harassment: Vance v. Ball State University and University of Texas S.W. Medical Center v. Nassar. Both cases involve the Court’s attempts to interpret wording in Title VII and determine congressional intent in doing so, and both strengthened employer positions, and both came down as 5-4 decisions.
First, the Court held that the proper standard for determining who is a supervisor for liability purposes is whether the person in question has the significant power to make tangible employment decisions such as pay rate, firing and promotions. The plaintiff had advocated for a broader standard to determine who is a supervisor, that is, whether that person could direct day to day activities. The Court’s decision makes it more difficult for a plaintiff to bring a case to jury because it is more difficult to establish liability where discriminatory actions are not performed by supervisors.
Second, the Court held that in a retaliation case, the plaintiff must prove that “but for” the intent to retaliation, the termination or other negative employment action would not have occurred. This also makes it harder for the plaintiff to bring a retaliation case to jury than under the proposed “mixed motive” standard that would only require a plaintiff to show that retaliation motive was only one of several reasons for the action.
In both cases, Justice Ginsberg read her dissent from the bench and urging congressional action to “correct” these outcomes. This is a similar scenario to that seen in the Lilly Ledbetter case, where the Court interpreted Title VII in favor of the employer with a 5-4 vote, and Congress swiftly modified the statutory wording at issue in order to implement the dissent’s view.
The Court made another pro-employer decision in American Express v. Italian Colors Restaurant, even though is not a employment case. The Court held that waiving class action rights in arbitration agreements is enforceable. This makes it more difficult for a class with individual small cases from banding together for a class action and again points out the usefulness of an arbitration clause in your employment agreements.
Same Sex Couples
On June 26 the Supreme Court of the United States issued historic decisions in Hollingsworth v. Perry and United States v. Windsor. Most impactful is that ruling that Section 3 of the Defense of Marriage Act of 1996, which barred same sex couples from being recognized as spouses for purposes of federal statutes, was found unconstitutional as to legal same sex marriages. The Court did not rule that same sex marriage must be allowed, but that where such marriages have been recognized as lawful, such as in the state of Washington, those spouses are entitled to the same federal benefits as opposite sex married couples.
Over 1000 federal statutes address marital or spousal status and will require modification. Federal laws that we can expect to be impacted include the Internal Revenue Code, ERISA, COBRA, FMLA and HIPAA.
President Obama has ordered federal agencies to engage in review of the appropriate statutes and has counseled patience as the review process proceeds. Nonetheless, employers, estate planners and tax advisors can anticipate that the forthcoming guidelines will be favorable to providing benefits to same sex marriages and should prepare to answer a variety of questions and to implement the myriad of changes this paradigm shift will bring.
The first step in addressing these impacts is to identify plans, policies and other relevant benefits under which marital status is relevant, for review and modification as necessary. In particular, employers and advisors will want to review how “spouse” is defined and revise accordingly. Washington employers may have already engaged in this exercise with the advent of domestic partnership laws and the passing of Referendum 74 in 2012, however, the anticipated changes in federal law merit a second and thorough review.
The review of plans and implementation of any changes should involve all the necessary related functions: HR, payroll, finance, and tax (small businesses may well have one or two persons who take on all these areas). Because employers with plans subject to ERISA have fiduciary duties, such employers should have the functioning fiduciary prepare to answer questions regarding the impact on their particular plan.
As a starting point, the following are the most apparent impact points for planners and employers to consider.
- Flexible Spending Accounts and Health Savings Account Funds. These may now be used for same sex spouse expenses, regardless of whether the spouse is the employee’s tax dependent.
- COBRA. Same sex spouses may now have rights to elect COBRA continuation coverage upon divorce, and independent rights to COBRA coverage upon a qualifying event (termination/reduction in hours).
- Qualified retirement plans. The same sex spouse of the tax qualified retirement plan participant would now be the automatic death beneficiary and would also be the automatic beneficiary of a survivor annuity plan that provides for a “qualified joint and survivor annuity.” The same sex spouse would also need to consent to a participant’s election to waive that form of benefit.
- FMLA. The term “spouse” has been defined under the FMLA as “a person of the opposite sex.” Employers covered by FMLA should now grant to qualifying employees the necessary time off to care for sick same sex spouses.
- Social Security. Survivor benefits should become available to same sex married couples.
- Estate Planning & Tax. See our recent newsletter from the Estate Planning & Wealth Transfer Group on DOMA
- Immigration. A U.S. citizen should now be able to sponsor a same sex spouse, and such spouse should have equal access to all immigration benefits.
This is a sea change in administration of federal benefits, rights and responsibilities. Full clarity will not be seen for months or years. Some of the larger looming questions include whether these changes are retroactive, what will happen when couples lawfully married in one state move to another state that does not recognize their union, and what, if any, penalties for non-compliance will be and when will they become effective. We will watch as these questions and others develop and are resolved.