Labor and Employment Law

By Brian R. Carnie, David M. Whitaker, Robert C. Schmidt, and Angela W. Adolph

The IRS is starting to notify employers of their potential liability under Obamacare’s employer mandate for the 2015 calendar year.  According to the IRS, the determinations are based on the employer’s 1094-C/1095-C informational returns filed for the 2015 tax year as well as individual tax information filed by the employer’s employees.

The IRS will notify an employer of potential liability for the employer shared responsibility payments (“ESRP”) via Letter 226J, which will set forth the preliminary calculation of the penalties owed and will provide detailed instructions for either paying or contesting all or part of the same.  Employers will have just 30 days from the date the notice was mailed to respond before the IRS will issue a notice and demand (i.e, a bill) for payment.  Failure to timely respond will result in waiver of your defenses to payment.

Given the timing of these initial notices, many employers will receive these during the holidays when offices are short-staffed or perhaps even closed.  The notices may or may not be directed to the appropriate contact person previously identified on the 1094/1095-C forms.

Employers would be wise to take the following immediate steps:

  1. Notify your administrative staff that any letters from the IRS should be forwarded immediately to a designated person for review. Have someone monitor the incoming mail if you will be closed for any significant period of time.
  2. Gather copies of your company’s 2015 ACA reports so that you can quickly compare your entries to that in any penalty notice you may receive.
  3. Make sure you have access to the data necessary to review any purported assessments that are indicated for one or more employees for 2015. If you relied on a third party vendor for reporting purposes, contact the vendor to see if and how they may be able to help and/or for access to their backup data.

The 2015 reports were confusing and there likely will be discrepancies and/or inaccuracies that need to be corrected, especially with the mandated use of indicator codes and the numerous transition relief rules/exceptions that applied in 2015.  You should also expect that one or more employees may have submitted false or inaccurate information when they filed their individual returns or applied for a subsidy on the exchange.  Don’t wait for receipt of the IRS penalty notice before taking the above steps.  You will have very limited time to review and gather lots of information.  We recommend that you get your lawyer or accountant involved at the outset to fully protect your rights and IRS appeal options.

Kean Miller stands ready to help.

By David M. Whitaker, Brian R. Carnie, and Robert C. Schmidt

As employers are well-aware, the Affordable Care Act (ACA or “Obamacare”) imposes certain minimum employee health insurance coverage requirements for employers that employ 50 or more fulltime employees (aka “applicable large employers”).  Employers who do not meet the employee coverage mandate face statutory penalties for non-compliance.  In the face of these additional costs, some employers have contemplated taking steps to evade these requirements, either by reducing employee work hours to bring them below fulltime status (30 hours per week for ACA purposes) or by eliminating employee headcount.  But the results in a recent case illustrate that such tactics may create significant employer exposure.

In Marin v. Dave and Busters, Inc., United States District Court for the Southern District of New York (Civil Action No. 15-cv-3608), the plaintiff alleged that in order to avoid significant costs associated with ACA compliance, the employer engaged in a concerted effort to cut employee work hours and headcount.  The plaintiff claimed that her work hours were drastically reduced, and as a result she no longer qualified to participate in the company’s group health insurance plan.  The lawsuit asserted that these employer actions against the plaintiff and other employees violated the Employee Retirement Income Security Act (“ERISA”).  Specifically, Section 510 of ERISA makes it unlawful for an employer to discriminate against employees for exercising their rights under a covered employee benefit plan, or for the purpose of interfering with their attainment of rights under a covered employee benefit plan (such as an employee group health benefit plan).

Marin was the only named plaintiff in the lawsuit, but she sought to certify a class action on behalf of some 1,200 employees nationwide.  In support of the claim, the plaintiff cited statements allegedly made by management to employees during meetings as well as statements made by the company to the media suggesting that changes to employee work hours and head count were motivated by avoidance of ACA-mandated health insurance costs.

The federal district court denied the employer’s motion to dismiss in early 2016, finding the plaintiff had pleaded an actionable interference claim if the facts alleged were proven to be true.  After several months of additional litigation, the employer and the plaintiff recently agreed to a settlement (on a class-wide basis) in the amount of $7.4 million, inclusive of attorney’s fees to be awarded by the court (of up to 33% of the settlement fund amount).  The settlement is pending approval by the court.

The Marin case is one of the first cases in the nation to assert an ACA avoidance claim against an employer under Section 510 of ERISA, so it remains to be seen whether this is the beginning of a larger trend targeting employers on this basis.  But the availability of attorney’s fees under the ERISA statute and the opportunity to seek class action certification creates a potential for these kinds of claims to proliferate.

The Marin case provides a clear reminder that employers must proceed with caution when terminating employees or reducing their work hours in situations where those changes can be portrayed as motivated by a desire to prevent employees’ from participating in an ERISA-covered benefit plan, whether in response to concerns about mounting costs imposed by the ACA or otherwise (such as for the purpose of excluding employees with high claims history under a group health plan from continuing to participate in the plan).

By David M. Whitaker

OSHA’s regulation at 29 CFR § 1904 requires employers with more than 10 employees in most industries to keep records of occupational injuries and illnesses at their business establishments. The regulation was first issued in 1971. Covered employers must record each recordable employee injury and illness on an OSHA Form 300, known as the “Log of Work-Related Injuries and Illnesses.” Recordable injuries and illnesses include those that involve death, loss of consciousness, days away from work, restriction of work, transfer to another job, medical treatment other than first aid, or diagnosis of a significant injury or illness by a physician or other licensed health care professional.

Employers must also prepare a supplemental OSHA Form 301 “Injury and Illness Incident Report” that provides details about each case recorded on the OSHA 300 Log. At the end of each year, covered employers must prepare a summary report of all injuries and illnesses recorded on the OSHA300 Log, known as the “Summary of Work-Related Injuries and Illnesses,” and are required to post this form in the workplace in a conspicuous location. Failure to meet these injury and illness recording and posting requirements can result in OSHA citations and penalties.

Until recently, employers were not required to submit their illness and injury reports to OSHA unless they were requested by the Agency (often during an OSHA site inspection). During the waning days of the Obama Administration, OSHA published a new rule which requires certain employers to electronically submit their OSHA-mandated employee injury reports (with employee name field information deleted) to OSHA, which in turn will publish the information on its public website.

The final rule imposed the following new requirements:

  1. § 1904.41(a)(1)—Establishments with 250 or more employees that are required to keep part 1904 records must electronically submit the required information from the three recordkeeping forms that they keep under part 1904 (OSHA Form 300A Summary of Work-Related Injuries and Illnesses, OSHA Form 300 Log of Work-Related Injuries and Illnesses, and OSHA Form 301 Injury and Illness Incident Report)
  2. § 1904.41(a)(2)—Establishments with 20-249 employees that are classified in a designated industry listed in appendix A to subpart E of part 1904 (so-called high hazard industries) must electronically submit the required information from the OSHA Form 300A annually.
  3. The final rule requires other employers to electronically submit information from part 1904 recordkeeping forms to OSHA upon request.

It is important to note that the electronic reporting requirement is based on the size of an “establishment,” not the employer’s total number of employees company-wide. An establishment is defined as a single physical location where business is conducted or where services or industrial operations are performed. An employer may be comprised of one or more establishments, and the number of establishments may vary from year to year. An employer is required to maintain employee injury reports (and electronically submit them, if covered by the new requirements) for each of its covered establishments.

The electronic reporting requirement became effective on January 1, 2017, with a two-year phase in period. Employers were originally required to submit their 2016 OSHA Forms by July 1, 2017 and their 2017 OSHA Forms by July 1, 2018.  Beginning in 2019 and for every year thereafter, all annual OSHA Forms will be due by March 2 of the following year.

Earlier this year OSHA announced that it would postpone the 2016 submittal deadline from July 1st to December 1, 2017 to allow the Trump Administration additional time to further study these requirements. On November 22, 2017, OSHA announced that it will again extend the date by which employers with covered establishments must submit the data from the 2016 Form 300A to OSHA’s electronic database.  The new deadline is December 15, 2017, which OSHA explained is necessary to “allow affected employers additional time to become familiar with a new electronic reporting system launched on August 1, 2017.”

The OSHA Injury Tracking Application (ITA) website where employers will be required to make their electronic records submissions can be found here.

The electronic data submission is controversial because of its public nature, and many in industry have criticized the new requirement as part of the Obama Administration’s tactics of publicly shaming employers as a compliance technique.  OSHA has justified the new rule on its belief that the electronic data collection and public disclosure of employers’ workplace injuries is necessary to “identify and mitigate workplace hazards and thereby prevent worker injuries and illness,” and its view that “behavioral economics” through publication of the collected information will “nudge” employers to improve compliance efforts.

Recent comments by Secretary of Labor Alex Acosta suggest that the Trump Administration may be considering further tweaks to these requirements, or at least how the reported information may be published by the Agency.  During a hearing before the House Education and the Workforce Committee on November 15, Secretary Acosta indicated that OSHA is continuing to examine the rule.

“We are balancing the issues of privacy – because it was asking for some information that was very detailed and that identified individuals – with the needs [sic] to get information so that we can engage in appropriate and targeted enforcement.”

Given these developments, it does not appear that the Trump Administration will do away with the electronic submission requirement altogether, so affected employers should continue preparations for compliance with the electronic reporting requirements by the new December 15th deadline.  But given that some changes to alleviate employer concerns may be yet to come, affected employers may wish to consider delaying their 2016 electronic reporting as long as possible to be in position to take advantage of any late-breaking developments in the Agency’s application of this rule.  And it is also possible that OSHA could extend the deadline a third time to account for additional changes to the reporting requirements.

By David M. Whitaker

Companies that anticipate filing petitions for new H-1B visas to employ foreign guest workers in a “specialty occupation” should begin working now with their immigration counsel to ready their petitions for filing with the United States Citizenship and Immigration Service (USCIS).  Specialty occupations eligible for employment in H-1B status are those for which a four-year bachelor’s degree or higher is a minimum entry level requirement.  Examples of H-1B eligible occupations include engineers, accountants, physicians, architects and attorneys.  Spouses and children (under the age of 21) are eligible to accompany the alien guest worker in H-4 dependent status.  An employer may employ the alien guest worker for up to 6 consecutive years in the United States in H-1B status, and further extensions of status may be possible in the event the employer elects to sponsor the guest worker for an employment-based green card (also known as permanent residence status).  Initial H-1B petitions are typically approved for a three-year period that the employer can extend through subsequent extension petitions.

USCIS begins accepting petitions for new H-1B visas on April 1st of each year (in 2018, it will be April 2, as April 1 falls on a Sunday), with an effective employment start date of October 1 if the petition is approved. Each year there is a cap on the maximum number of H-1B visas that will be issued – a 65,000 base cap plus an additional 20,000 for beneficiaries who hold a U.S. master’s degree or higher.  In recent years the number of new H-1B petitions filed has greatly exceeded the number of available H-1B visas, which has resulted in the USCIS implementing a “lottery,” with only those randomly selected employer petitions being processed. USCIS is reported to have received 199,000 H-1B petitions last April – more than 3 times the number of H-1B visas available.  Next April year employers can likely expect a similar lottery scenario.

President Trump was outspoken during the 2016 presidential campaign about the need to reform the H-1B visa program.  On April 17, 2017 he signed an executive order that directed federal agencies to implement a “Buy American, Hire American” strategy, which included a section geared at immigration reform. The order directed federal agencies (including the Secretary of Labor) to suggest reforms to ensure H-1B visas are given to the “most-skilled or highest paid” beneficiaries.  The order also requested the agencies propose new rules for preventing fraud and abuse of work visas. “Right now, H-1B visas are awarded in a totally random lottery — and that’s wrong,” he said indicating disagreement with the current USCIS lottery system at the time he signed the order.  So far the executive order has not resulted in any regulatory reforms to the H-1B visa application process.  There have been some legislative proposals targeting the H-1B visa program, including increases to minimum salary required to be paid by employers and prohibitions against employers hiring H-1B guest workers to displace U.S. citizen employee. But the prospect for passage of this legislation is very uncertain.

While there have been no legislative or regulatory reforms to the H-1B visa program to this point, there are signs that the USCIS is subjecting these visa applications to a higher level of scrutiny through the Agency’s increased used of the “request for evidence” process– in which the petitioning employer is requested to submit additional evidence to support key elements of the petition, such as the existence of a bona fide employment relationship, or whether the job that is the subject of the petition meets the definition of a “specialty occupation.”  Requests for evidence also have the effect of producing substantial delay in the processing of the work visa petition.  Accordingly, employers should carefully explain the guest worker’s eligibility for H-1B status in the employer support letter and submit ample evidence to support each required element given the increased scrutiny by USCIS in processing H-1B work visa petitions.

Employers who utilize the USCIS work visa program should also take note of a recent change that affects how the Agency will process petitions seeking extension of work visa status for their current work visa holders.  In the past, USCIS had exercised deference in determining eligibility when processing employer petitions for extensions of for work visas previously approved by the Agency.  In a memorandum issued on October 23, 2017 the USCIS discontinued this practice, and made clear that petition examiners are required to thoroughly examine extension petitions for eligibility without regard to the fact that the Agency previously approved the employer’s original petition to employ the alien beneficiary.  As a consequence, employers who anticipate filing petitions for extension of H-1B (and other types of work visas) should take care to support their extension petitions with the same level of evidence as they would in filing an original work visa petition on behalf of the beneficiary.

By A. Edward Hardin, Jr., Scott D. Huffstetler, Erin L. Kilgore, David M. Whitaker, Terry D. McCay, Brian R. Carnie, and Michael D. Lowe,

From New York to Hollywood and now New Orleans, well-publicized allegations of sexual harassment have dominated the news.  Click here for a recent CNN article on a recent issue.  Sexual harassment is unlawful and can lead to much bigger issues than bad press.   Click here for information on sex-based discrimination from the U.S. Equal Employment Opportunity Commission.  These stories highlight the need for employers to communicate their stances against sexual harassment, to promulgate clear policies barring sexual harassment, to enforce those policies, and to train employees, supervisors, managers, and even executives.  Training on policies is an essential component of an effective policy.  Simply stating a position on an issue like sexual harassment may not be enough to ensure a work environment free from unlawful harassment.   Now is the time to work with your internal human resources groups and outside counsel to evaluate your HR legal compliance on issues from harassment to wage and hour compliance.  Now is the time to train employees on sexual harassment and to implement a robust training program so that your policies are not just words on a page.  Now is the opportunity to prevent becoming the next headline.

By A. Edward Hardin, Jr., Brian R. Carnie, and Erin L. Kilgore

A Federal District Judge in Texas struck down an Obama administration Department of Labor Wage and Hour Division rule that would have nearly doubled the salary basis requirement for some exempt employees.  Had the rule remained in place, for certain exempt employees, employers would have had to roughly double the exempt employees’ salaries to maintain the employees’ exempt status, or treat the employees as eligible for the overtime premium.  In November, the court issued a nationwide injunction stopping the rule from going into effect.  This ruling likely moots the pending appeal of the injunction, and it seems unlikely that the Trump administration will appeal this latest ruling given that the administration has already begun laying the groundwork for a possible revision of the prior rule.  Stay tuned.

Read the article here.

By Erin L. Kilgore and Scott D. Huffstetler

On Monday, a Fifth Circuit majority held that a class-action and collective action waiver was enforceable, regardless of whether or not the waiver was part of an arbitration agreement.  This is good news for employers in the Fifth Circuit who do not want to have mandatory arbitration agreements with employees, but do want to have safeguards in place to prevent class and/or collective actions.

The National Labor Relations Board (“NLRB”) has consistently determined that such waivers violate the National Labor Relations Act (the “Act”), particularly an employee’s right to engage in concerted activities for the purpose of mutual aid or protection.  According to the NLRB, the Act contemplates a right to participate in class and collective actions.

In this case, the NLRB determined that the employer violated the Act by requiring job applicants to sign, and then subsequently seeking to enforce, a class and collection action waiver, which was not contained in an arbitration agreement.  The employer sought review of the NLRB’s decision, and the Fifth Circuit found for the employer.

The Fifth Circuit previously rejected the NLRB’s position on such waivers, holding that the use of a class or collective action is procedural, not a substantive right, and the Act does not guarantee employees a substantive right to participate in class and/or collective actions.  See D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013).

On Monday, the court reaffirmed this precedent.  Although the court’s prior decision considered class and collective action waivers in the context of an arbitration agreement, the Fifth Circuit held that its precedent was not limited to arbitration agreements.  Thus, class action and collective actions waivers are enforceable in the Fifth Circuit, regardless of whether the waiver is contained in an arbitration agreement or other contract.

Employers with operations outside of the Fifth Circuit (Louisiana, Mississippi, and Texas) should be mindful that there are courts in other jurisdictions that may have reached different conclusions, and that the NLRB takes a position contrary to the Fifth Circuit.  All employers should stay tuned on this issue, as the Supreme Court may decide an arbitration matter this year, which could force reconsideration of the Fifth Circuit’s decision.

A copy of the Fifth Circuit’s decision can be found here.

By Chelsea Gomez Caswell

Yesterday, the Department of Labor (“DOL”) Wage and Hour Division released a preview copy of a request for information (“RFI”) before issuing revised proposed overtime exemption regulations under the Fair Labor Standards Act (“FLSA”). The RFI is scheduled for publication in the Federal Register today, July 26, 2017, which will start a 60-day public comment period.

According to the DOL’s news release, the RFI solicits feedback on questions related to the salary level test, the duties test, various cost-of-living information, inclusion of non-discretionary bonuses and incentive payments to satisfy a portion of the salary test for highly compensated employees, and automatic updating of the salary level test. Instructions for submitting comments and additional contact information are found in the RFI. A preview copy of the RFI, released by the DOL, is available online here.

The regulations at issue (often referred to as the “white collar” exemptions) apply to workers employed in an executive, administrative, or professional capacity that also meet certain criteria relating to salary basis, salary level, and job duties. The DOL released the RFI in contemplation of revising the final rule released by the DOL during the Obama administration  (“2016 Final Rule”), which attempted to raise the minimum salary required to be exempt from the FLSA’s overtime pay requirements, from $455 per week to $913 per week. The 2016 Federal Rule was enjoined by a federal district judge in Texas in November 2016  and remains in limbo. In fact, in briefing to the Fifth Circuit Court of Appeal recently filed last month, the DOL acknowledged that it intends to undertake steps and further rulemaking to determine what the salary level should be. It is now clear that these steps include the release of the RFI. The RFI states that in light of the pending litigation, the DOL decided to issue the RFI, rather than immediately proceed to a notice of proposed rulemaking (“NRPM”), in order to gather public input and aid in the development of a NRPM. The DOL expressly recognized that it released the RFI to address stakeholder concerns, including concerns that the standard salary level set in the 2016 Final Rule was too high and to address the Rule’s potential adverse impact on low-wage regions and industries.

Some of the specific questions posed in the RFI include but are not limited to the following:

  • Whether updating the prior 2004 salary level for inflation would be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used;
  • Whether the regulations should contain multiple standard salary levels and, if so, how they should be set;
  • Whether different standard salary levels should be set for the executive, administrative, and professional exemptions;
  • Whether the standard salary level set in the 2016 Final Rule works effectively with the standard duties test;
  • To what extent employers increased salaries of exempt employee to retain exempt status, or otherwise altered employees’ hours or pay, in anticipation of the 2016 Final Rule’s effective date;
  • Whether small businesses or entities encountered any unique challenges in preparing for the 2016 Final Rule’s effective date;
  • Whether a test for exemption relying solely on duties performed, without regard to the amount of salary paid, would be preferable;
  • Whether the salary level set in the 2016 Final Rule excluded from exemption particular occupations traditionally covered by the exemption; (
  • Whether there should be multiple total compensation levels for the highly compensated employee exemption; and
  • Whether the standard salary level and highly compensated employee total annual compensation level should be automatically updated on a periodic basis.

Although the future of the FLSA overtime regulations is still uncertain, for employers the key takeaway is that, for the time being, nothing has changed. The RFI suggests that changes are on the horizon, but for now, the 2016 Final Rule is still enjoined, and the DOL will not issue any revised rules until after the 60-day public comment period lapses and an NRPM is issued. Until further notice, the minimum salary threshold remains at $23,660 a year ($455 per week), but it is important for employers to continually monitor this ever-changing issue.

For additional information, see the DOL’s July 25, 2017 news release, available here.

Louisiana State Capital

By Matthew C. Meiners

Under Louisiana law, workers’ compensation is the exclusive remedy that an employee may assert against his employer or fellow employees for work-related injury, unless he was the victim of an intentional act. That exclusive remedy also extends to statutory employers.

Workers’ compensation legislation was enacted to provide social insurance to compensate victims of industrial accidents, and it reflects a compromise between the competing interests of employers and employees: the employer gives up the defense it would otherwise enjoy in cases where it is not at fault, while the employee surrenders his or her right to full damages, accepting instead a more modest claim for essentials, payable regardless of fault and with a minimum of delay. However, due to the fear that employers would attempt to circumvent that liability by interjecting between themselves and their workers intermediary entities which would fail to meet workers’ compensation obligations, the law provides that some principals are by statute deemed, for purposes of liability for workers’ compensation benefits, the employers of employees of other entities. This is what is known as statutory employment, and it is intended to provide greater assurance of a compensation remedy to injured workers.

Under Louisiana law, there are two bases for finding statutory employment:

First Basis: The existence of a written contract recognizing the principal as the statutory employer. A “principal” is any person who undertakes to execute any work which is a part of his trade, business, or occupation in which he was engaged at the time of the injury, or which he had contracted to perform and contracts with any person for the execution thereof. Such a contractual provision creates a rebuttable presumption of a statutory employer relationship between the principal and the contractor’s employees, whether direct or statutory employees. This presumption may be overcome only by showing that the work is not an integral part of or essential to the ability of the principal to generate that individual principal’s goods, products, or services.

Second Basis: Being a principal in the middle of two contracts, referred to as the “two contract theory.” The two contract theory applies when: (1) the principal enters into a contract with a third party; (2) pursuant to that contract, work must be performed; and (3) in order for the principal to fulfill its contractual obligation to perform the work, the principal enters into a subcontract for all or part of the work performed. The two contract statutory employer status contemplates relationships among at least three entities: a general contractor who has been hired by a third party to perform a specific task, a subcontractor hired by that general contractor, and an employee of the subcontractor.

A statutory employer is liable to pay to any employee employed in the execution of the work or to his dependent, any compensation under the Louisiana Worker’s Compensation Act which the statutory employer would have been liable to pay if the employee had been immediately employed by the statutory employer. In exchange, the statutory employer enjoys the same immunity from tort claims by these employees as is enjoyed by their direct employer. Additionally, when a statutory employer is liable to pay workers’ compensation to its statutory employees, the statutory employer is entitled to indemnity from the direct employer and has a cause of action therefor.

Statutory employer status can provide very valuable protection to companies who contract for work to be performed in Louisiana; however, you should consult your attorney to make sure you meet the legal requirements, and to properly draft the necessary contractual provisions.

 

time

By A. Edward Hardin, Jr.

Under the federal Fair Labor Standard Act, employees are entitled to be paid time and a half their regular rate of pay for all hours worked over 40 in a workweek.  Private employees cannot elect, nor can private employers offer, “comp time” in lieu of overtime pay.  Private employers can offer (or may be able to require) time off within a single workweek to offset longer-than-normal hours or to prevent an employee from exceeding the 40-hour threshold in a single workweek, but private employers cannot not offer true comp time to employees to offset overtime.  Unlike the private sector, under some circumstances, public sector employees can elect “comp time” in lieu of overtime pay.  On May 2, in a vote along party lines, the U.S. House of Representatives voted to extend to private employers the ability to offer employees the option to elect comp time in lieu of overtime, something that has been in place for a number of years for public employers.  The Society for Human Resource Management (SHRM) and the White House both support the bill, but the bill may face a filibuster by Democrats in the Senate.   Here are links to an article from SHRM and an article from CNN on the bill and the House action.