Transcript HR Laws, Pitfalls, and Health Care Reform: How it Impacts

HR Laws, Pitfalls, & Health Care
Reform: How They Impact Your
Business
Presented by:
Joseph A. Appelbaum, President
Agenda
 HR Laws/Regulations & Pitfalls to Avoid
 Employment Eligibility Verification
 Family & Medical Leave Act/Military Leave
 FLSA & Employee Classification
 ERISA Compliance – New Enforcement
Focus
 Health Care Reform Under PPACA
HR Laws/Regs That Create Problems for
Employers
 Homeland Security Act of 2002 – Created DHS,
USCIS & ICE - I-9 Compliance
 Family & Medical Leave Act (FMLA) – Expanded
Military Leave
 Fair Labor Standards Act (FLSA) – Misclassification
of Employees Extreme Focus for Regulators
 Employee Retirement Income Security Act (ERISA)
– Old Law/New Focus for Regulators
I-9 Compliance
 ALL EMPLOYERS SUBJECT
 Form I-9 used to verify IDENTITY & EMPLOYMENT
AUTHORIZATION
 Completed forms MUST be available for inspection by
DHS, DOL, DOJ, and any other federal or state agencies
 Accurately completed forms should be stored in a
SEPARATE I-9 file/binder (not in personnel files) for easy
access
 All ER staff that verify docs & complete forms must be
trained
I-9 Compliance Pitfalls
 Incomplete forms on file – ALL sections
must be completed by employee &
employer
 Incorrect recording of identity &
employment authorization documents
 Missing I-9s
 Not updating forms with new
verifications when employment
authorizations expire
 REPEATING mistakes & not completing
internal audits
I-9 Compliance Fines & Criminal Penalties
Civil Fines and Criminal Penalties for Form I-9 Violations
First Offense
Civil Violations
Minimum
Maximum
Second Offense
Minimum
Maximum
Third Offense
Minimum
Maximum
Hiring or continuing to employ a person, or
recruiting or referring for a fee, knowing that the
person is not authorized to work in the United
States.
$375 for each $3,200 for
$3,200 for
$6,500 for
$4,300 for
$16,000 for
worker.
each worker. each worker. each worker. each worker. each worker.
Failing to comply with Form I-9 requirements.
$110 for each
form.
Committing or participating in document fraud.
$375 for each $3,200 for
$3,200 for
$6,500 for
$3,200 for
$6,500 for
worker.
each worker. each worker. each worker. each worker. each worker.
$1,100 for
each form.
$110 for each
form.
$1,100 for
each form.
$110 for each
form.
$1,100 for
each form.
Committing document abuse.
$110 per
violation.
$1,100 per
violation.
$110 per
violation.
$1,100 per
violation.
$110 per
violation.
$1,100 per
violation.
Unlawful discrimination against an employmentauthorized individual in hiring, firing, or recruitment
or referral for a fee.
$375 per
violation.
$3,200 per
violation.
$3,200 per
violation.
$6,500 per
violation.
$4,300 per
violation.
$16,000 per
violation.
Asking an employee for money guaranteeing that
the employee is authorized to work in the United
States, also called an indemnity bond.
Criminal Violations
Engaging in a pattern or practice of hiring,
recruiting or referring for a fee unauthorized
aliens.
Pay $1,100 for each bond the employee paid to the employer.
First Offense
Up to $3,000 for each
unauthorized alien.
Second Offense
Up to $3,000 for each
unauthorized alien.
Third Offense
Up to $3,000 for each
unauthorized alien.
Up to 6 months in prison for Up to 6 months in prison for Up to 6 months in prison for
the entire pattern or
the entire pattern or
the entire pattern or
practice.
practice.
practice.
I-9 Compliance
 What to do…
• Audit, audit, audit!!!
• I-9 audit on an annual basis
• Check for Form I-9 updates (www.uscis.gov – new
form just released!)
• Train staff
• Require new employees to provide documentation
& complete I-9 within 3 days of employment
• Terminate EE immediately if not provided
FMLA – Do you have to comply?
 FMLA entitles eligible employees of covered
employers to take unpaid, job-protected leave for
specified family and medical reasons with
continuation of group health insurance coverage
under the same terms and conditions as if the
employee had not taken leave
 Covered Employers = employers who employ 50
or more employees in a 75 mile radius
FMLA – Expanded Military Leave Effective
3/8/2013
 The DOL has revised the regulations to implement and
interpret statutory amendments to FMLA under the
National Defense Authorization Act (NDAA) including:
• Extended military caregiver leave
• Expanded the definition of a serious injury or illness for
both current servicemembers and veterans
• Expanded qualifying exigency leave to eligible employees
with family members serving in the Regular Armed
Forces
FMLA Pitfalls
 No FMLA policies & procedures
 Not Training supervisors to identify FMLA-qualifying
leave
 Not following notice requirements
 Not designating leave as FMLA
 Not continuing health benefits during leave
 Wrongly terminating employees for FMLA qualifying
leave
 Not Returning the employee to his/her prior position
FMLA Compliance
 Employer Liability
• Employee Lawsuits – Wrongly terminating the
employee or retaliating against an employee that
requests FMLA – Can result in reinstatement of
terminated employee with back-pay, lost benefits &
any other compensation denied or a monetary
judgment based on these factors
• Possible liability for employee costs related to
seeking reimbursement under FMLA
• Complaints possible through DOL Wage & Hour
Division
• $100 fine for not posting required employee rights
notice at each work site
FMLA Compliance
 What to do…
• Get training on the intricacies of FMLA
• Establish FMLA policies & procedures
• Train HR, payroll, and supervisory staff to
identify FMLA-eligible leave
• Provide applicable notices
• Designate leave as FMLA
• Continue health benefits during leave
• DO NOT terminate employees for FMLA
qualifying leave
• Return the employee to his/her exact
position or a fully equivalent position upon
return
FLSA & Employee Misclassification
 Exempt vs. NonExempt
 Employee vs.
Independent
Contractor
Exempt vs. Non-Exempt
 Pitfalls
•
•
•
•
•
Relying on job titles only
Inflating job titles to “make” a job exempt
Not evaluating each position individually
Assuming all “salaried” employees are exempt
Assuming all “administrative” employees are
exempt
• Assuming all “supervisors” are exempt (i.e.,
shift supervisor)
Exempt vs. Non-Exempt
 Employer Liability
• Unpaid overtime, attorneys fees, fines and
penalties that can be assessed by federal and
state agencies
• Federal fines up to $10,000 or $1,000 per
violation depending on the willfulness of the
violation (in addition to back OT)
• Employers subject to criminal prosecution for
willful violation
Exempt vs. Non-Exempt
 What to do…
• Again….Audit on a regular basis
• Have current, accurate job descriptions &
job titles
• Define how you will handle OT for
salaried employees that are non-exempt
(or pay them hourly)
• Evaluate EVERY position individually
• Determine if a “supervisor” should
actually be exempt
Employee vs. Independent Contractor
 The DOL states:
Misclassified employees are often denied access to critical benefits
and protections—such as family and medical leave, overtime,
minimum wage and unemployment insurance—to which they are
entitled. Employee misclassification also generates substantial
losses to the Treasury and the Social Security and Medicare funds,
as well as to state unemployment insurance and workers
compensation funds.
 Cross auditing between DOL & IRS
 Employers & workers may be subject to stiff criminal
and civil penalties and fines if the IRS determines that
the employment relationship has been misclassified
Employee vs. Independent Contractor (IC)
 Pitfalls
• Letting the worker choose to be an IC without
evaluating true status
• Hiring ICs to do the same work as other regular
employees
• Controlling when, how, where, or in what way an IC
performs work
• Reimbursing ICs for job-related expenses separately
• Not requesting/verifying IC’s EIN, State Registration,
Licensing, etc.
Employee vs. Independent Contractor (IC)
 Employer Liability & Lawsuit Examples
• Back wages & corresponding payroll taxes
• Federal Judge Orders Firm to Pay $1.3 Million in Back Wages;
Company Misclassified Employees as Independent Contractors Following an investigation by the DOL, Pennsylvania based kgb
USA Inc. was deemed to have misclassified workers as ICs instead
of employees, and subsequently failed to pay minimum wage to
current and former employees in violation of the Fair Labor
Standards Act.
• A recent court case highlights the risks of staffing firms placing ICs
at client sites. Arise Solutions, a supplier to companies including
AT&T and Apple, reportedly settled a class action lawsuit for $1.25
million having misclassified more than 200 service providers as ICs
when they should have been employees.
Employee vs. Independent Contractor (IC)
 What to do…
• Audit current worker classifications
• Develop procedures for classifying status
going forward
• Follow guidance & “tests” provided by the
DOL & IRS
• Obtain an IRS Determination when truly in
doubt about a particular worker or class of
workers
ERISA Compliance
 Employee Retirement Income Security Act (ERISA) was
enacted in 1974, but many (if not most) small and
medium sized employers are out of compliance with
the requirements of Title I of the Act. However,
compliance with Title I of ERISA is not an option – it
is the law.
 Until recently, the DOL only applied limited
enforcement of ERISA and related regulations –
primarily targeting larger organizations and
organizations in which employees reported violations.
This leniency is over!
ERISA Compliance
 Pitfalls
• Lack of awareness by employers
• Thinking carrier documents are compliant (i.e.,
certificates of coverage)
• Confusion due to the complexity of the
regulations
• Complacence due to prior limited enforcement
of the regulations
• Not understanding the extensive penalties that
may result from non-compliance
ERISA Compliance
 Penalties
• EBSA has authority under ERISA Section 502(c)(2) to
assess civil penalties for reporting violations up to
$1,000 per day against plan administrators who fail
or refuse to comply with annual reporting
requirements
• Section 502(i) gives the agency authority to assess
civil penalties against parties in interest who engage
in prohibited transactions with welfare plans ranging
from 5% to 100% of the amount involved in a
transaction
ERISA Compliance
 What to do…
• Have a written Plan Document(s)
• Follow Plan terms strictly under fiduciary standards
• Furnish Summary Plan Description(s) (SPDs) automatically
to plan participants
• Furnish Summary of Material Modifications (SMMs) when
necessary
• File Form 5500 annually for each plan (exception for plans
with less than 100 participants)
• Furnish Summary Annual Reports
• Furnish Summary of Benefits & Coverage (SBCs) as
required to all plan participants (PPACA addition)
Health Care Reform Under PPACA
 The Affordable
Care Act is here
to stay &
employers must
continue to
prepare
Health Care Reform Under PPACA
2012
Initial MLR Reporting (for CY2011) and
Rebate issuance in August
Women's Preventive Services expanded
(plans renewing on or after 8/1/2012)
Summary of Benefits and Coverage (SBC) and
60-day advance notice of material
modifications (plans renewing on or after
9/23/12)
W-2 reporting of aggregate value of
employer-sponsored coverage on 2012 W-2
Patient Centered Outcomes Research
Institute (PCORI) Fee (plans renewing on or
after 11/1/2011 through 2018)
2013
2014
FSA contributions limited to $2,500
Employer "Play or Pay" Mandate
Medicare payroll tax rate increase
for high income earners
Individual Mandate to purchase insurance or pay a
penalty
Notice to inform employees of
Exchange provided by employer
(delayed)
Federal and State Insurance Exchanges, including
Individual subsidies
Guaranteed issue: Pre-existing conditions
prohibited
Essential Health Benefits (EHB) Coverage
standardized for small group plans
No Annual dollar limits on Essential Health Benefits
(EHB) in any plan
90-day limit on Waiting Periods
Employer annual reporting of employee coverage
Annual Insurer industry fee for fully-insured plans
through 2018
Reinsurer Fees through 2016
Wellness Incentives
Deductible caps of $2k for individual and $4K for
family for small group plans
2015-18
Increased penalties on
individual mandate begin
Excise Tax on high cost coverage
(Cadillac Tax)
States have the option to open
Exchanges to all employers by
2017
Employer Mandate – “Pay or Play”
 Complying with the PPACA Employer Mandate is
the most significant piece of the Act for
employers at this time
 Compliance is required as of January 1, 2014 (or
the beginning of the plan year if not on a
calendar year and assuming the plan was in
place prior to the end of 2012)
 Analysis should start now!!
Employer Mandate – “Pay or Play”
 Basic questions you need to answer…
• Do you have 50 or more FTEs (full time equivalent
employees)?
• If yes, do you offer coverage to all full time
employees (working 30 or more hours per week)?
• If yes, does the plan provide Minimum Essential
Coverage (at least 60% actuarial coverage)?
• If yes, is the plan “Affordable” to all full time
employees (i.e., employee contributions for single
coverage less than 9.5% of each employee’s annual
income)?
Other PPACA Items of Note
 Notice of Exchange – Employers must provide existing
employees and new employees on their hire date
information about the existence of state insurance
Exchanges (Originally effective 3/1/2013 but has been
delayed by the DOL; guidance to be provided by
summer or fall 2013)
 Nondiscrimination Requirements – Non-grandfathered
fully insured group health plans must comply with IRC
§105(h) rules that prohibit discrimination in favor of
“highly-compensated individuals.” (Delayed indefinitely,
but important to consider now)
Other PPACA Items of Note
 Individual Mandate – Affordable Care Act requires individuals
to maintain health insurance for themselves and their
dependents (some exemptions available). Penalties for
individuals will be:
• 2014: $95 per adult and $47.50 per child, up to a family maximum of $285
or 1 percent of family income, whichever is greater
• 2015: $325 per adult and $162.50 per child, up to a family maximum of
$975 or 2 percent of family income, whichever is greater
• 2016: $695 per adult and $347.50 per child, up to a family maximum of
$2,085 or 2.5 percent of family income, whichever is greater
 Federal Subsidies – Subsidies available to lower-income
individuals enrolling in state-based Exchanges. Subsidy amounts
depending on income, age, and family size
Other PPACA Items of Note
 State or Federally-Facilitated Exchanges – Every state
must establish a health insurance Exchange (or allow
one to be federally facilitated)
 Automatic Enrollment – Employers with 200+
employees who offer group health plans must
automatically enroll all FT employees as soon as they
are eligible for coverage
PPACA Next Steps for You…
 Define the group (individual or controlled group)
 Determine the number of Full Time Equivalent (FTEs)
employees now & projected for 2014 – 50+ FTEs must
comply
 Identify any seasonal workers, contingent workers, and/or
temporary workers – seasonal workers as defined by the
DOL are excluded, but depending on hours worked,
contingent and temporary workers may need to be covered
 Perform a qualitative analysis to determine if existing plans
meet qualifying eligibility and affordability standards
PPACA Next Steps for You…
 Determine the true organizational costs of either offering
or not offering health coverage after 2013 (i.e., pay or play)
– for many organizations, this is not the "no-brainer" that it
may first appear
 Verify plan waiting periods are in compliance
 Prepare and distribute Employer Exchange notices (pending
further guidance)
 Verify plans meet non-discrimination requirements
(pending further guidance)
 Employment Verification – www.uscis.gov
 FMLA - http://www.dol.gov/whd/fmla/
 FLSA & Misclassification http://www.dol.gov/whd/flsa/
 ERISA Compliance http://www.dol.gov/ebsa/compliance_assistance
.html
 PPACA – www.healthcare.gov,
http://www.dol.gov/ebsa/healthreform/
Thank you!
Joseph Appelbaum
President
Potomac Companies, Inc.
[email protected]
301-840-0770