Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

In addition to extending the premium COBRA subsidy until the end of the year, the bill makes certain technical changes to the program itself. Specifically, the bill makes the following clarifications, among others:

• Adds a new section clarifying special rules in the case of individuals losing COBRA coverage due to a reduction in hours;
• Clarifies the period of assistance; and
• Adds a provision stating that the government or the individual may bring a civil action to enforce applicable provisions of this law, and provides that the Secretary may assess a penalty of up to $110 per day against a plan sponsor or health insurance issuer for each violation.

The Senate also approved by voice vote an amendment (S. Amdt. 3430) to the bill that aims to encourage employers to continue their defined benefit pension programs by providing temporary relief from statutory pension funding obligations. According to a press release issued by Sen. Isakson (R-GA) – who introduced the amendment with Sen. Ben Cardin (D-MD) – the amendment would provide employers with two options “to spread out” their pension obligations:

Under the first option, employers would be able to repay their pension shortfall over seven years, but the seven-year amortization would start two years late. During the two-year delay period, the employer would only owe interest on the shortfall. Under the second option, employers would be able to pay back their pension shortfall over 15 years.

Employers electing to avail themselves of the “two and seven”, or 15-year relief plans would be required to abide by the “cash flow rule,” under which an employer must make an extra “matching” contribution equal to the amount by which any of its employees’ taxable compensation exceeds $1 million. An employer would also be required to contribute an amount equal to the “extraordinary dividends” paid during the year, and an amount equal to the aggregate fair market value of the “stock redeemed” during the year that exceeds the employer’s net income for accounting purposes.

Other pension funding relief measures are included in the bill, which, according to Sen. Baucus, are designed to provide temporary, targeted funding relief for single employer and multiemployer pension plans that suffered significant losses in asset value due to the 2008 market downturn.

The bill includes other tax credit measures, including an extension until Dec. 31, 2010 of an employer wage credit for employees who are active duty members of the uniformed services. This extension would provide eligible small business employers with a credit against income tax liability for a taxable year in an amount equal to 20 percent of the sum of differential wage payments to activated military reservists, up to $4,000, and be applicable to payments made after December 31, 2009. Other program extensions include one that provides a tax credit for employers of qualified employees that work or live on or near an Indian reservation, and an extension of the Work Opportunity Tax Credit (WOTC) for qualifying employers that hire employees in the areas hit hardest by Hurricane Katrina.

The measure will now need to be reconciled with the House bill and undergo a second round of approval before it can be signed into law.

Specifically, the bill would extend the COBRA premium subsidy eligibility period until May 31, 2010, and create special rules in the event individuals lose coverage due to a reduction in hours, among other COBRA-related changes. The recently-expanded unemployment benefits, including increased payouts and longer duration of benefits, would be extended through May 31, 2010.

With respect to job promotion, the bill would provide employers with a $1,000 per employee tax credit for each new hire retained for at least a year. The bill also incorporates the job stimulation proposal introduced by Senators Chuck Schumer (D-NY) and Orrin Hatch (R-UT).  Their bill, the Hire Now Tax Cut Act of 2010 (S. 2983), would exempt any employer that hires a worker who has been without full-time work for at least 60 days from paying the employer’s share of Social Security taxes on that worker for 2010.

Senate Majority Leader Harry Reid (D-NV) had originally planned to introduce the jobs bill late last week in order to expedite a vote before the Presidents’ Day recess. The massive snowstorms that have hit the Washington, DC area since Friday have necessarily derailed those plans.

In December, the House of Representatives approved its version of a jobs bill, the Jobs for Main Street Act of 2010.  Like the draft Senate bill, the Jobs for Main Street Act contains COBRA subsidy and unemployment insurance extensions.

Photo credit:  amphotora

President Obama is expected to sign the final spending bill, which adds the following provision:

Sec. 8116. (a) None of the funds appropriated or otherwise made available by this Act may be expended for any Federal contract for an amount in excess of $1,000,000 that is awarded more than 60 days after the effective date of this Act, unless the contractor agrees not to:

(1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention; or

(2) take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that the employee or independent contractor resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention.

Additionally, the bill specifies that as of 180 days after the bill’s enactment, contractors – in order to receive defense contracts – must certify that their subcontractors have also agreed to the arbitration restrictions with respect to their own employees and independent contractors who perform work on the contract. Subcontractors subject to these restrictions are those holding subcontracts exceeding $1 million to perform work related to the federally funded defense project.

The arbitration provisions do not apply to agreements that cannot be enforced in this country. Moreover, in limited circumstances, the Secretary of Defense may waive these requirements on a case-by-case basis, if the Secretary or the Deputy Secretary personally determines that the waiver is necessary to avoid harm to national security interests of the United States, and that the term of the contract or subcontract is no longer than necessary to avoid such harm.

The appropriations bill also extends the expanded unemployment benefits, including increased payouts and longer duration of benefits, through February 28, 2010, and extends from nine to 15 months the 65 percent premium COBRA subsidy provided by the American Recovery and Reinvestment Act (“ARRA” or “Economic Stimulus”) to eligible unemployed workers. The measure also extends the COBRA coverage eligibility date from December 31, 2009 to February 28, 2010 for employees otherwise eligible for the COBRA subsidy. 

Discrimination in the Workplace

The Servicemembers Access to Justice Act of 2009 (H.R. 1474) was introduced. This bill would amend several provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).

The Common Sense English Act (H.R. 1588) would allow employers to implement English-only policies in the workplace.

In agency news, the Department of Labor (DOL) has made available to employers a database of job candidates with disabilities.  Additionally, the Equal Employment Opportunity Commission (EEOC) has issued a discussion letter advising that mandatory employee health risk assessments for obtaining health insurance coverage would violate the Americans with Disabilities Act (ADA).

EFCA/Labor-Management Relations

The U.S. Chamber of Commerce and the U.S. Council for International Business have written a letter to congressional leaders claiming that the Employee Free Choice Act (EFCA) is inconsistent with international law.

The Teaching and Research Assistant Collective Bargaining Rights Act (H.R. 1461) was introduced. This bill would allow private university students who serve as teaching and research assistants to form or join a union.

The DOL is seeking comment on a proposed delay of the effective and applicability dates for a rule regarding LM-2/LM-3 union financial disclosure forms.

Employee Benefits

The Department of Labor has made available model COBRA notices for employers.  Meanwhile, the Preexisting Condition Patient Protection Act of 2009 (H.R. 1558, S. 623), a bill that would prohibit preexisting condition exclusions in health insurance policies, was introduced in both the House and Senate.

Immigration

The Border Control and Contractor Accountability Act of 2009 (H.R. 1555) would debar or suspend contractors from federal contracting if they employ undocumented workers.
 

The terminated employee may claim that he/she was "constructively discharged" or, as a practical matter, involuntarily terminated. The terminated employee will have the right to apply for the subsidy, and if the request is denied, the terminated employee may appeal directly to the Department of Labor (DOL) under regulations to be issued. Other situations may be where the employee alleges that the employee was told that if the employee did not quit, he/she would be fired. The DOL/IRS have not issued regulations on such alleged "constructive discharge" situations, but such regulations may be expected, as claims of this nature are already being made.

Misconception 2: The COBRA subsidy only applies to companies that are subject to Federal COBRA.

Clarification: The legislation relating to the Federal COBRA subsidy includes certain State COBRA rules (also known as "mini-COBRA"). If the mini-COBRA rule provides continuation coverage comparable to the Federal COBRA laws, then employers who are subject to mini-COBRA will be subject to the COBRA subsidy provision. However, the rules are not as strict in some instances; for example, employers providing mini-COBRA do not need to provide information about the subsidy to those employees who had a qualifying event prior to the date of enactment.

Example: California COBRA (Cal-COBRA) applies only to employers with 2 to 19 employees. Since COBRA applies to employers with 20 or more employees, Cal-COBRA is designed to 'fill the gap' of employers with fewer than 20 employees and therefore not subject to Federal COBRA. The Federal COBRA subsidy rules are designed to apply to employers that are subject to Cal-COBRA even though they are not subject to Federal COBRA. (Note that Cal-COBRA will apply only to an employer with a fully insured group medical plan, but not to a self-insured plan.)

Misconception 3: An employer who subsidizes COBRA must wait to get a tax credit in its annual income tax return.

Clarification: If an employer is eligible for the tax credit due to its requirement to subsidize COBRA, the tax credit will be in the form of an offset to the employer's payroll taxes. An employer is obligated to file a quarterly Form 941 to report payroll taxes, and the new Form 941 has a line item for the COBRA subsidy. If an employer does not have enough payroll taxes to offset the COBRA subsidy tax credit, the employer may apply excess credit to a future quarter or apply for a refund. It is important to note that an employer cannot use the credit until the covered employee; or covered dependent, pays for his or her portion of the COBRA premium and attests that he or she qualifies for the subsidy.

Misconception 4: A former employee who was involuntarily terminated on September 1, 2008 must be given retroactive continuation coverage under the COBRA subsidy law.

Clarification: The new COBRA election applies to coverage beginning March 1, 2009 (in the case of a plan with monthly coverage), but the maximum COBRA period continues to start with the original qualifying event. So in this example, the former employee who did not elect continuation coverage when first eligible has a second chance to make a COBRA election, but the coverage begins March 1, 2009, and the maximum COBRA period continues to be 18 months from September 1, 2008.

This article was co-authored by Susan K. Hoffman, a shareholder in Littler’s Philadelphia office, and Russell D. Chapman, Of Counsel in Littler’s Dallas office.

For more insight into the new COBRA provisions, see Littler’s Benefits ASAP: “Stimulus Package: An In-Depth Look at the New COBRA Subsidy in the ARRA” by Steven J. Friedman, Susan K. Hoffman and J. Rene Toadvine.
 

Economic Stimulus

President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA). Detailed analyses of the employment-related provisions of ARRA are now available.

Employee Benefits

The No Discrimination in Health Insurance Act of 2009 (H.R. 1092) would amend the Employee Retirement Income Security Act (ERISA) to prohibit discrimination in group health coverage and individual health insurance coverage.

A new bill – the Economic Recovery Adjustment Act of 2009 (S. 431) would impose additional restrictions on executive compensation.

Immigration

The Electronic Employment Eligibility Verification and Illegal Immigration Control Act (H.R. 1096) was introduced. This bill would, among other things, create an electronic employment eligibility verification system and verification process for employers and increase penalties for Immigration and Nationality Act violations.

Labor/Management Relations

Three large and influential nurses’ associations have merged, forming the largest Registered Nurses (RN) union in the country.

COBRA

The stimulus provisions regarding changes to the Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation of coverage are complex and place additional burdens on employers. The key concept of the new COBRA provision involves the creation of a new “qualifying event” that makes involuntarily-terminated employees (and their covered dependents) eligible for a 65% COBRA premium subsidy for up to 9 months. An eligible employee is one who has been involuntarily terminated between September 1, 2008 and December 31, 2009 and who earns less than $125,000 if single or $250,000 if filing jointly (for those earning above these limits, the subsidy becomes taxable through an income-based phase in). Eligible individuals who initially declined coverage must be given an additional 60 days to elect to receive the subsidy. Employers or health plans that administer the COBRA benefits will receive a credit against payroll taxes for the cost of the subsidy. COBRA notices must provide information about the new extended coverage. Model notices will be made available from the Department of Labor within 30 days. Under ARRA, group health plans are permitted to offer eligible individuals to choose different coverage under the plan when the individual was receiving active employee coverage. 

The new COBRA provisions are effective for premiums as of March of this year.

H-1B Restrictions for TARP Recipients

An eleventh hour modified amendment to the stimulus package substantially limits the ability of employers that receive Troubled Asset Relief Program (TARP) funds to hire or keep employees who hold H-1B work visas. For two years, employers that receive TARP funds or certain other federal loans will be restricted from hiring new H-1B workers, or extending the status of their existing H-1B workers, unless they can show they have actively recruited US workers (that is, US citizens or permanent residents) and were unsuccessful in these attempts. Additionally, these employers must show that they are not using H-1B workers to replace laid-off US workers or otherwise displace American workers.

 Executive Compensation

A controversial portion of the stimulus package sets limits on executive compensation. The Act creates a sliding scale of compensation limits for the highest earners in an organization receiving TARP funds based on the amount of funds received. Some restrictions include banning a senior executive officer and any of the next 20 most highly compensated employees from receiving any bonus, retention award, or incentive compensation based on statements of earnings, revenues, gains, or other criteria that are later found to be materially inaccurate. The restrictions in this provision do not, however, ban the payment of bonuses required to be paid pursuant to a written employment contract executed on or before February 11, 2009.

The compensation limits prohibit golden parachutes for a senior executive officer or any of the next 5 most highly-compensated employees. These provisions do not apply to the payment of long-term restricted stock, provided that such long-term restricted stock (a) does not fully vest during the period in which any obligation arising from financial assistance provided to that TARP recipient remains outstanding; (b) has a value in an amount that is not greater than 1/3 of the total amount of annual compensation of the employee receiving the stock; and (c) is subject to such other terms and conditions as the Secretary may determine is in the public interest.

The sliding scale of limitations works as follows: 

• For any financial institution that received financial assistance provided under the TARP equal to less than $25,000,000, the prohibition shall apply only to the most highly compensated employee of the financial institution.
• For any financial institution that received financial assistance provided under the TARP equal to at least $25,000,000, but less than $250,000,000, the prohibition shall apply to at least the 5 most highly-compensated employees of the financial institution, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient.
• For any financial institution that received financial assistance provided under the TARP equal to at least $250,000,000, but less than $500,000,000, the prohibition shall apply to the senior executive officers and at least the 10 next most highly-compensated employees, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient.
• For any financial institution that received financial assistance provided under the TARP equal to $500,000,000 or more, the prohibition shall apply to the senior executive officers and at least the 20 next most highly-compensated employees, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient. 

Limitations are also imposed on “excessive expenditures,” such as entertainment or events, office and facility renovations, aviation or other transportation services, and other activities or events that are not reasonable expenditures for staff development, reasonable performance incentives, or other similar measures conducted in the normal course of the business operations.

Work Opportunity Tax Credit (WOTC)

The WOTC, a voluntary program by which employers earn a tax credit for hiring individuals from one or more specific groups, is expanded under ARRA. Under the new law, employers are eligible to earn a tax credit for hiring unemployed veterans and disconnected youths after December 31, 2008. A person is considered an unemployed veteran under this Act if he or she has been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date, and is in receipt of unemployment compensation under state or federal law for at least four weeks during the one-year period preceding the date of hire. A “disconnected youth” is considered one who is between the ages of 16 and 25, is not regularly attending school or employed during the 6-month period preceding the hiring date, and is not “readily employable by reason of lacking a sufficient number of basic skills.” 

For an in-depth analysis of these changes, see Littler's ASAPs: Stimulus Package: An In-Depth Look at the New COBRA Subsidy in the ARRA by: Steven J. Friedman, Susan K. Hoffman, and J. René Toadvine, and Besides COBRA: What Does the Stimulus Package Have for Employers by: Ellen N. Sueda, GJ Stillson MacDonnell, Patricia A. Haim, and Chadwick M. Graham.

 

Labor/Management Relations

President Obama issued a series of executive orders aimed at federal contractors.  These orders significantly broaden the Labor Secretary’s enforcement powers. Litter has published an in-depth analysis of these executive orders.

President Obama and Vice President Biden seem to disagree on EFCA’s timeline. Meanwhile, union members continue to lobby Congress for the passage of the Employee Free Choice Act (EFCA).
 

Discrimination in the Workplace/Employee Wage and Hour Law

President Obama signed the Lilly Ledbetter Fair Pay Act of 2009 into law two days after the House approved the bill by a vote of 250 to 177.

The Servicemembers Access to Justice Act of 2009 (S. 263) would add stricter provisions to the Uniformed Services Employment and Reemployment Rights Act of 1994.

Employee Benefits

A number of bills were introduced that seek to extend COBRA coverage. Such bills include the COBRA Coverage Extension Act of 2009 (H.R. 694), the Health Care and Training for Older Workers Act (S. 281) and the House version of the Stimulus bill (H.R. 1) that incorporated COBRA extension provisions for the elderly and unemployed.

Additionally, a comprehensive health care bill (H.R. 676) was introduced by Rep. John Conyers (D-MI), although it is unlikely this legislation will be considered anytime soon.

The Veterans Jobs Opportunity Act of 2009 (S. 274) would provide employers with a tax incentive to hire unemployed veterans.

Immigration

The House-passed Stimulus Bill (H.R. 1) contains a provision requiring E-Verify participation. Also in E-Verify news, the required implementation date has been postponed until May 21, 2009. The Employee Verification Amendment Act of 2009 (H.R. 662) would extend the pilot programs for employment eligibility confirmation, among other things.

Labor/Management Relations

Senate Majority Leader Harry Reid (D-NV) has indicated that the Employee Free Choice Act (EFCA) will be up for consideration this summer.

The Highway Trust Fund Reform Act of 2009 (H.R. 687) would repeal the prevailing wage rate requirements for laborers and mechanics employed by contractors who work on federal-aid highway and public transportation construction projects.

In procedural news, the NLRB issued a new rule that allows for electronic service of process. 

The second health care-related bill was a much more extensive reform proposal. The United States National Health Care Act or the Expanded and Improved Medicare for All Act (H.R. 676), introduced by Rep. John Conyers (D-MI) and co-sponsored by 30 others, seeks to provide comprehensive health insurance coverage for all United States residents, among other things. This bill will not likely see much action in the near future, as House Majority Leader Steny Hoyer (D-MD) has indicated that although he favors a health care overhaul, the current economic situation will likely push off serious consideration of any major health care legislation until next year.

Prevailing Wage Rates for Highway Construction

Perhaps in anticipation of stimulus bill-funded construction projects, Rep. Virginia Foxx (R-NC) introduced H.R. 687, a bill that would amend section 113 of title 23 and section 5333(a) of title 49 of the United States Code to repeal the prevailing wage rate requirements applicable to laborers and mechanics employed by contractors or subcontractors to work on Federal-aid highway and public transportation construction projects. The Highway Trust Fund Reform Act of 2009 would take effect on the 31st day following the date of enactment, yet would not affect any contract already in existence on that date or made pursuant to an invitation for bids outstanding at that time.

This bill was referred to the Committee on Transportation and Infrastructure and to the Committee on Education and Labor.

Economic Stimulus

On Thursday, the House Ways and Means Committee voted 24 to 13 along party lines in favor of its portion of the $825 billion economic recovery package. The bill (H.R. 598) that seeks to provide tax, health and unemployment relief now will be combined with other measures to form H.R. 1, the American Recovery and Reinvestment Act, which is expected to receive full House consideration this week.   H.R. 598 isn't available for complete publication, but its provisions are discussed in a House Ways and Means fact sheet. 

A controversial aspect of this bill for employers is the provision of funds for extended COBRA coverage for the unemployed. The bill would provide a 65 percent subsidy for COBRA continuation premiums for up to 12 months for individuals and their families who have been involuntarily laid off between September 1, 2008 and December 31, 2009. The continuation of health care coverage would last as long as 12 months. Those individuals who were terminated but did not elect COBRA coverage within 60 days as required by law would be given an additional 60 days to do so. This bill also extends COBRA coverage for older (at least 55 years old) and tenured (have been with the employer for at least 10 years) workers. These individuals would be able to maintain their COBRA coverage at their own expense until they become eligible for Medicare or are able to secure alternate employment.

Lawmakers who were concerned about the effect of the cost of continued COBRA coverage for employers offered a number of amendments to the bill, all of which were defeated.

Veterans’ Employment Rights

The Servicemembers Access to Justice Act of 2009 (S. 263) would amend title 38 of the U.S. Code to improve enforcement of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). This bill, among other things, would make agreements to arbitrate a dispute regarding an employee’s USERRA rights unenforceable, except in cases where the agreement is formed after the dispute arises. Moreover, this act would not invalidate the provisions of a collective bargaining agreement. S. 263 would also enhance remedies for USERRA violations. Under this act, an employer found in violation could be liable for both compensatory and punitive damages, as well as attorney’s fees. In addition, this legislation clarifies that USERRA prohibits wage discrimination against a member of the armed forces, and provides for equitable relief when appropriate.

This bill was referred to the Committee on Veterans' Affairs.

Another bill introduced this month seeks to provide employers with an incentive to hire unemployed veterans. The Veterans Jobs Opportunity Act of 2009 (S. 274) would amend the Internal Revenue Code to provide a tax credit to employers that hire an unemployed veteran in 2009 or 2010. An “unemployed veteran” for the purposes of this bill is defined as a veteran who was discharged or released from active duty in the Armed Forces during 2008, 2009 or 2010, and has been receiving unemployment compensation under state or federal law for at least four weeks during the 1-year period ending on the hiring date. This amendment would apply to those hired after December 31, 2008.

This bill was referred to the Committee on Finance. 

Senior Workers

The Health Care and Training for Older Workers Act (S. 281) would, among other things, extend COBRA continuation coverage for certain older workers, and create employment and training programs for seniors. This bill would amend section 602(2) of the Employee Retirement Income Security act of 1974 (ERISA) and section 2202(2)(A) of the Public Health Service Act by inserting a “Special Rule for Certain Older Workers” provision that qualifies an employee for continuing health care coverage if that employee is at least the early retirement age as defined in the Social Security Act, but is not yet entitled to benefits under title XVIII of the Social Security Act based on age.

This bill was referred to the Senate Committee on Health, Education, Labor, and Pensions.

Employee Verification

The Employee Verification Amendment Act of 2009 (H.R. 662) would extend the pilot programs for employment eligibility confirmation, and provide funds to the Commissioner of Social Security and the Secretary of Homeland Security to acquire, install and maintain technological equipment and systems for the implementation of an employment verification confirmation system.

This bill was referred to the Committee on the Judiciary, in addition to the Committees on Education and Labor and Ways and Means.
 

Discrimination in the Workplace/Employee Wage and Hour Law

The Senate voted to invoke cloture on the Lilly Ledbetter Fair Pay Act (S. 181), limiting debate on this wage discrimination bill and paving the way for its almost certain passage and presidential signature.

Immigration

A new bill introduced in the House, the Illegal Immigration Enforcement and Social Security Act of 2009 (H.R. 98) would significantly increase fines and jail time for employers who knowingly hire illegal aliens or fail to verify their employment eligibility using a new procedure outlined in the bill.

Workplace Flexibility

The new regulations governing the Family and Medical Leave Act (FMLA) went into effect Friday, January 16.