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Breaking HR News

Clarification of the FMLA Definition of “Son or Daughter” Issued by DOL

The Family and Medical Leave Act (FMLA) allows eligible employees to take up to 12 weeks of unpaid leave during a 12-month period to care for a child, spouse, parent, or for themselves, and includes time off for the adoption or the birth of a child.  New guidance issued by the U.S. Department of Labor clarifies the definition of “son or daughter” as it relates to “a child of a person standing in loco parentis.”  The definition of loco parentis is “in place of parent.”  Persons who have no biological or legal relationship to the child may now be eligible for unpaid FMLA leave under the new interpretation.  The clarification states that “the employer may require the employee to provide reasonable documentation or statement of a family relationship.  A simple statement asserting that the requisite family relationship exists is all that is needed in situations such as in loco parentis where there is no legal or biological relationship.”  Further, “it is the Administrator’s interpretation that the regulations do not require an employee who intends to assume the responsibilities of a parent to establish that he or she provides both day-to-day care and financial support in order to be found to stand in loco parentis to a child.”   The letter specifically includes unmarried partners and same sex partners, and clearly states that, “Neither the statute nor the regulations restrict the number of parents a child may have under the FMLA.”   In addition to coverage by same sex and unmarried partners, other examples include uncles who care for nieces or nephews when their single parent has been called to active military duty or grandmothers who care for a sick grandchild when the mother is also ill.

HR Experts On Demand recommends that employers carefully consider FMLA requests by employees to act in loco parentis in light of this interpretation, as well as all requests for FMLA leave.

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Do Reference Checks Really Make A Difference?

Do you think that checking professional references prior to hire is a waste of time and candidates only provide references who are going to say positive things about the candidate?  According to a recent survey by OfficeTeam of more than 1000 senior managers at companies with 20 or more employees, 21% of job seekers are dropped after reference checks are completed.  In addition to Background Checks, which verify items such as social security number, employment and academic verification, criminal history, and searches of the Patriot Act and Sex Offender registries, HR Experts On Demand recommends professional Reference Checks to get a better picture of the candidate’s work habits, behaviors, relationships, and applied skills. 

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Plan/Prevent/Protect May Be the Next Regulatory and Enforcement Initiative.

The Department of Labor (DOL) has announced its Spring 2010 Regulatory Agenda to include a “Plan/Prevent/Protect” strategy that mandates all employers prepare, implement and share with employees their comprehensive compliance programs for wage and hour, workplace safety and health, affirmative action, and pensions.  This new strategy would place the onus on employers to, in effect, certify their own compliance.
 
“Plan” would require employers to create a plan for identifying and remediating potential violations and other risks to workers, and that the plans are available to workers so they can fully understand them and help monitor their implementation.  It would apply to the areas mentioned above, including wage and hour, workplace safety and health, affirmative action, and pensions.

“Prevent” would require employers to thoroughly and completely implement the plans mentioned above  in a manner that prevents legal violations, rather than just creating plans on paper that are not carried out.

“Protect” would require employers to ensure that the plan’s objectives are met on a regular basis, that is, actually protect workers from violations of their workplace rights.

Employers who fail to take these steps to plan, prevent and protect will be considered out of compliance and could be subject to remedial action.  These initiatives are considered only to be the beginning as Congress continues its major emphasis on promoting protection of workers’ rights.  While these initiatives have not yet been implemented, HR Experts On Demand recommends employers begin to audit their current policies and plans in these areas and make appropriate changes to minimize the likelihood of federal enforcement actions, private lawsuits or union organizing.

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Emergency Unemployment Compensation and COBRA Premium Subsidies End?

As of June 2, 2010, the extension for federal Emergency Unemployment Compensation ended, as did Cobra premium subsidies on May 31, 2010.  To date, Congress has not passed further extensions to either of these benefits.  A proposal, H.R. 4213 which would extend both benefits through the end of the year met resistance and extension to both benefits has not been passed.

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Businesses with Fewer than 100 Employees
Must Comply with State Verification Laws on July 1

Starting  July 1, businesses with fewer than 100 employees must comply with South Carolina’s 2008 immigration law which requires employers to verify the work status of all new employees hired.  Employers can use the federal E-Verify database, which is free, or they can require a state-issued driver’s license or identification card, or documents issued by certain reciprocal state.   Under the SC law, using E-Verify is a safe harbor.  Employers who choose E-Verify must use it consistently with all newly hired employees.  Verification under the state law must be made within five days of hire.  The law does not change requirements of federal employment verification laws.

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Update to E-Verify Launched 6-13-10

A redesigned E-Verify interface has been launched by the U.S. Citizenship and Immigration Services in order to provide enhanced security, usability, accuracy and efficiency.  Users must complete a short tutorial before using the redesigned system.  The USCIS website has also been updated to be more user-friendly, include simplification of terminology and includes easy-to-find, useful links. 

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Clarification of Restrictions to ‘Grandfathered’ Health Plans

Interim Final Rules designed to clarify allowable changes to health care plans that can be made and permit the plans to retain a ‘grandfathered’ status under the Patient Protection and Affordable Care Act (PPACA) have been issued, and include a fact sheet that can be viewed here.  Grandfathered plans do not have to comply with two of the new requirements under the PPACA.  Routine changes that can be made and allow plans to retain grandfathered status include:

• Cost adjustments to keep pace with medical inflation
• Adding new benefits
• Making modest adjustments to existing benefits
• Voluntarily adopting new consumer protections under the new law
• Making changes to comply with state and other federal laws
• Routine and modest adjustments to co-payments, deductibles and employer contributions

All health plans, including grandfathered plans, must include the following provisions for plan years beginning on or after September 23, 2010:

Plans for the vast majority of Americans who get their health insurance through employers, whether a plan is grandfathered or not will also provide:

Plans that are not grandfathered must also provide:

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Young Adult Coverage under PPACA

The new Patient Protection and Affordable Care Act (PPACA) provides that adult children must be allowed to remain covered on their parent’s group health care plan until age 26, effective for plan or policy years beginning on or after September 23, 2010.  The Department of Health and Human Services encourages employers to allow this expanded coverage immediately in order to avoid gaps for new graduates or other young adults, and avoid costs of removing from coverage and re-enrolling them later.

Coverage must be allowed if the young adult does not have other employer-provided coverage available, even if the young adult no longer lives with the parent/parents, or is not a dependent on a parent’s tax return, or is no longer a student, or married.  If married, the young adult’s spouse or children do not qualify.  Plans must allow for a 30-day enrollment opportunity for the young adults and a written notice.  The value of any employer-provided health coverage for young adults is excluded from the employee’s income for tax purposes.  More detail and a list of companies who are immediately implementing this coverage can be found here.  While the Department of Health and Human Services estimates this change will only raise premiums in 2011 for employer plans about 0.7%, health insurers predict this provision alone will increase premiums 1.5%-2%.  Some consultants are estimating a total health care cost trend increase of 11% or more for 2011.  According to Mercer, an HR consultancy, cost increases have averaged 6% per year over the last five years.

Employers will need to determine whether to add the young adult coverage now or wait until renewal, decide how to handle eligible young adults currently on COBRA, and determine a communications plan regarding this issue.

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IRS Provides Guidance For Tax Treatment of Coverage For Adult Children

In order to encourage employers to provide immediate dependent coverage to adult children under age 27, the IRS has released guidance in Notice 2010-38.  The guidance allows both the reimbursement for adult children’s medical care, and the value of the coverage to be excluded from gross income under Section 106 of the IRC, and further confirms these benefits are not considered wages for FICA and FUTA purposes.  The guidance additionally allows employees to revoke a current election under a Cafeteria Plan and authorize a new election as the result of the change-in-status event, in order to pay for the additional costs of adding adult children to the plan.

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Limits Unchanged for 2011 Health Savings Accounts and High-Deductible Health Plans

Qualified high-deductible health plans (HDHPs), also known as catastrophic plans, have higher deductibles as their name implies, and lower premiums than traditional plans and are a growing trend with U.S. employers.   When a high-deductible health plan is in place, employers may also establish Health Savings Accounts (HSAs).  These accounts are owned by the employee and are tax advantaged with no federal tax withheld on funds deposited into these accounts.  The funds may be used by the employee to pay for qualified medical expenses without tax liability.
For 2011, the IRS has determined no change will be made to the limits for High Deductible Health Plans and Health Savings Accounts.  Limits will remain as follows:

2011 Limits for High-Deductible Health Plans and Health Savings Accounts:

HDHP minimum deductible amounts	Individual: $1,200    Family: $2,400
HDHP maximum out of pocket amounts	Individual: $5,950    Family: $11,900
HSA statutory contribution amount	Individual: $3,500    Family: $6,150
HSA catch-up contributions (age 55 or older)	$1,000

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FLSA Misclassification Bill in both Houses of Congress

The Employee Misclassification Prevention Act targets abuse of the employee/independent contractor classifications and is aimed at ensuring that employees are properly classified under the Fair Labor Standards Act (FLSA).  The FLSA establishes federal minimum wage and overtime provisions, among other things.  If passed, this bill would increase penalties on employers for misclassification up to $1,100 per employee for first-time violators and up to $5,000 per employee for repeat or willful violators, allow for double liquidated damages, increase reporting and communication requirements, provide protection from retaliation, and other reforms.  This Bill would have an immediate impact on employers and their use of independent contractors, require additional record keeping, reporting and communications by employers, and allow for heavier penalties for violations including first-time offenses occurring under good faith.

Employers need to review and update job descriptions and ensure proper classification of employees and independent contractors.  Obtaining outside assistance from experts helps to show good faith efforts for proper classification.

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October 1, 2010 New Date for Federal Drug Testing Guidelines Revisions

Implementation of revisions to the Mandatory Guidelines for Federal Workplace Drug Testing Programs has been delayed from May 1, 2010, to October 1, 2010, by the U.S. Department of Health and Human Services.  The revisions will require testing for Ecstasy (also known as MDMA) and 6-acetylmorphine (a metabolite of heroin), as well as lowering of the test cutoff concentration for amphetamines, and for cocaine.

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W-2 Reporting Requirement Requires Immediate Attention

For tax years beginning 1-1-2011, employers are required to report the aggregate cost of employer-sponsored health insurance coverage on employees’ Form W-2s.  Because employees who terminate during the year may request their Form W-2s early, the change to payroll systems must be in place by January 2011.  Reporting must include a monthly calculation of costs of medical plans, prescription drug plans, executive physicals, on-site clinics, Medicare supplemental policies, and employee assistance programs.  Dental and vision costs must also be included unless they are “stand-alone” plans.  Early interpretation suggests reporting also applies to former employees who are provided health coverage, such as early retirees and terminated employees on COBRA, and their surviving spouses, even though they would not normally receive a Form W-2.  Should this interpretation stand, it could dramatically increase an employer’s overall W-2 reporting requirements.

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Latest Extension to Unemployment Comp and COBRA Subsidy

The latest extension for Unemployment Compensation and COBRA Subsidy was passed on April 15, 2010, and provides the following extensions:

Another proposal, H.R.4213 is being considered that would extend unemployment and COBRA benefits through the end of 2010.

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Veterans Are In Demand For Jobs In 2010

Through the first quarter of 2010, employers have expressed significantly more interest in hiring veterans than in the previous two years.  Organizations that help veterans become re-employed indicate more employers are attending job fairs focusing on military personnel and asking for referrals.  While employers are asking questions about veterans’ abilities to transition to civilian life and cope with post-traumatic stress disorder, these issues have not been stumbling blocks to job offers.  Many employers find veterans to be highly disciplined workers with strong skills and to be high performers.

Employers must be certain to follow laws such as the Family and Medical Leave Act (FMLA) and the Uniformed Services Employment and Re-employment Rights Act (USERRA) as they apply to veterans and family members, and be aware of their responsibilities to make reasonable accommodations under the Americans With Disabilities Act (ADA) and amendments when needed. 

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Standards Set for Internships in the “For Profit” Private Sector

The DOL recently released new standards for employers to use in determining whether or not they are required to pay at least minimum wage and overtime under the Fair Labor Standards Act (FLSA) to the interns for their services.  The standards apply only to “for profit” private sector employers.  Should the internship meet the standards and be considered training, employers are not required to pay interns.  Six criteria are involved and include:

Should all six criteria exist, it is not necessary to consider the intern an employee and the provisions of the FLSA do not apply to the intern.  If interns are engaged in the operations of the employer or performing productive work, employers will be required to consider the intern an employee and meet wage and overtime requirements of the FLSA.  When establishing internship programs, employers should consider carefully the training to be assigned and type of supervision provided.
The DOL plans to continue its review to determine whether additional guidance is needed for internships in the public and not-for-profit sectors.

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US Senate Passes Jobs Bill

On March 17, 2010, the US Senate passed a $17.6 billion measure intended to spur hiring nationwide, sending the bill to the White House for the president's expected signature. Once signed, the bill would grant employers an exemption from their 6.2 percent Social Security payroll contribution for every new employee hired through the rest of the year, as long as that employee had been out of work for at least 60 days. There would also be an additional $1,000 income tax credit for every new employee kept on the payroll for 52 weeks. Employees’ pay would still be subject to the usual personal income and payroll taxes. The House is currently considering a $140 billion package passed by the Senate last week that contains a series of industry-friendly tax breaks such as a credit for research and development as well as extensions of unemployment benefits and COBRA insurance subsidies for the unemployed through the rest of the year.

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COBRA Subsidy Extended Again

President Barack Obama has signed legislation that extends the deadline for qualifying for subsidies for COBRA continuation coverage, allowing workers who are involuntarily terminated in March to qualify for the program. H.R. 4691 extends the deadline so that workers who are involuntary terminated between September 1, 2008 and March 31, 2010 are eligible for up to 15 months of COBRA subsidies.

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended by the Department of Defense Appropriations Act of 2010, allowed workers who were involuntarily terminated between September 1, 2008 and February 28, 2010 to be eligible for 65 percent COBRA subsidies. So, workers who were involuntarily terminated after February 28 wouldn't have been eligible for the COBRA subsidy unless Congress passed another extension, which it did.

H.R. 4691 extends the deadline so that workers who are involuntary terminated between September 1, 2008 and March 31, 2010 are eligible for up to 15 months of COBRA subsidies. The legislation also makes a few other changes and clarifications about the COBRA program.

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DOT Announces Texting Ban for Truck Drivers
Distracted Driving a Problem for All

U.S. Department of Transportation prohibits texting by interstate truck drivers and commercial bus and van drivers who carry more than eight passengers.  Truck and bus drivers who text while driving commercial vehicles may be subject to civil or criminal penalties of up to $2,750.  Distracted driving is a problem that persists in any business where employees travel in a vehicle as part of their daily tasks.  The risk applies to administrative employees as well as sales representatives, consultants and commercial drivers.  Employers may be liable for the actions of their employees who are distracted while driving, even if the employee is using the cell phone for business purposes on his or her personal time. HR Experts On DemandSM encourages every employer to develop a Distracted Driving policy and incorporate it into its Employee Handbook.  It should cover the new DOT  new regulation and also (1) prohibit all employees from texting (define and give examples) while driving on company business in company owned, employee-owned vehicles and rental cars, and (2) to prohibit (or discourage) all employees from talking on cell phones while in motion. State laws and insurance policy stipulations that govern texting and cell phone use must also be incorporated.

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            DOL Announces 2010 Goals and Hires 250 Investigators

The Department of Labor will seek to enact an array of 90 rules and regulations in 2010. Its Wage and Hour Division’s regulatory agenda currently has proposed rules the Family and Medical Leave Act (FMLA), recordkeeping under the Fair Labor Standards Act (FLSA) and other amendments to the FLSA.  The Wage and Hour Division intends to initiate rulemaking to update the recordkeeping regulation issued under the FLSA. That proposal would require more openness and transparency by demonstrating employers’ compliance with minimum wage and overtime requirements to workers, with the goal of  ensuring better compliance by regulated entities and assist the department with its enforcement efforts.   The division recently hired 250 new investigators to boost its ability to ensure compliance with wage and hour laws. HR Experts On DemandSM encourages employers to perform internal audits of compliance with all existing FLSA wage and hour regulations and, if they have 15 or more employees, the  Lilly Ledbetter Fair Pay Act of 2009.

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COBRA Subsidy Law Extended, Expanded

President Barack Obama signed into law an extension and expansion of the COBRA premium subsidy law. The extension means new compliance obligations for employers, as the program now runs through Feb. 28, 2010, the subsidy period is expanded by six months and new notice requirements must be met within a tight time frame.

The American Recovery and Reinvestment Act (ARRA) of 2009 established a new law under which "assistance-eligible individuals" (AEIs) were initially entitled to receive a 65-percent subsidy for continuation coverage premiums for up to nine months. Under the original law, an AEI is any COBRA qualified beneficiary who elects COBRA coverage and: (1) has a loss of group health coverage as a result of an involuntary termination of employment (other than gross misconduct); and (2) has a qualifying event between Sept. 1, 2008, and Dec. 31, 2009, is otherwise eligible for COBRA coverage during that period and elects that coverage.

The amount of time an AEI can receive a subsidy increases from nine to 15 months.  The subsidy eligibility period is expanded to include the period that begins with Sept. 1, 2008, and ends with Feb. 28, 2010 (formerly Dec. 31, 2009). Significantly, the new rule does not require that COBRA coverage begin by the end of the period (Feb. 28). Instead, the person is an AEI as long as the COBRA qualifying event (involuntary termination of employment) occurs by Feb. 28, 2010, and is entitled to COBRA coverage as a result of that event.  For any AEI for whom the premium subsidy now applies due to the extension, there is a transition period consisting of any period of coverage that begins before December 21, 2009, the extension's enactment date.  Plan administrators must provide a notice on extension rights to AEIs.  Other complex reporting and notice rules must also be complied with.   HR Experts On DemandSM recommends employers obtain the assistance needed to ensure they are providing the notices and complying with other provisions of the extension and expansion required on a timely basis.  Larger employers (and small employers with 20 or more employees and high turnover) should consider outsourcing all aspects of COBRA administration, an increasing difficult area to administer internally.

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 IRS Launches Radom Employment Taxes Audits

The IRS has announced that 5,000 or more employers are to be randomly selected for detailed employment tax audits. The focus will be on four areas:  improper classification of workers as independent contractors rather than as employees, fringe benefits, reimbursed expenses, and compensation of owner employees.  Determining whether a worker is classified correctly as an employee or independent contractor has been a recurring audit theme. Who is or is not an independent contractor is not easily determined. Consequently, the engagement of services of a worker as an independent contractor should be carefully reviewed both at the outset and during the course of the relationship. Small businesses and nonprofit organizations often believe they have wide latitude to classify a worker as an independent contractor, and as a result, commonly misclassify workers as independent contractors.  HR Experts On DemandSM encourages all employers to better understand the factors reviewed by the IRS, including behavioral control, financial control and type of relationship.   Formal agreements should be entered into with those workers properly classified as independent contractors.  Employers should also perform internal audits to determine compliance with regulations related to fringe benefits, reimbursed expenses and compensation of owner employees to make changes in business practices and to help mitigate any risks that may occur if they are subsequently audited by the IRS.

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