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

In general, this bill would require most large employers to provide health insurance to their employees, or contribute funds (in the form of an 8 percent payroll tax) on their behalf to help subsidize coverage in a newly-created Health Insurance Exchange (“Exchange”). A summary of the bill describes the Exchange as:

a transparent and functional marketplace for individuals and small employers to comparison shop among private and public insurers. It works with state insurance departments to set and enforce insurance reforms and consumer protections, facilitates enrollment, and administers affordability credits to help low- and middle-income individuals and families purchase insurance. Over time, the Exchange will be opened to additional employers as another choice for covering their employees. States may opt to operate the Exchange in lieu of the national Exchange provided they follow the federal rules.

As part of the employer “pay-or-play” option as described in a summary of the shared responsibility portion of the bill:

• Employers would contribute 72.5 percent of the cost of premiums for all full-time employees’ health coverage and 65 percent for a family policy.
• Employers have the option of providing part-time employees with health coverage by contributing a share of the expense, or contributing to the Exchange in order for part-time employees to seek coverage there.
• In the fifth year after the Exchange begins, companies that offer health insurance would have to meet minimum coverage standards like those required of plans in the Exchange.
• If an employer chooses not to offer health coverage to its employees, a penalty will be assessed based on the size of company’s payroll, which will fund the Exchange.

Small businesses with payrolls under $250,000 are exempt from the pay-or-play mandate. For businesses with payrolls over $250,000, the payroll penalty would start at 2% and rise to the full 8% for businesses with annual payrolls over $400,000. A small business tax credit would be available for small firms that chose to provide health insurance.

Portions of this bill regulating insurance coverage and market reforms have also raised concerns in the insurance industry. This bill would prohibit preexisting condition exclusions in health insurance plans, in addition to lifetime and annual limitations on benefits. The bill likewise bans the practice of charging higher health insurance rates based on factors such as gender or health status. Premiums would be allowed to vary based on age (to a limited extent), geography and family size only. Insurers would also be prohibited from refusing to sell or renew policies based on an individual’s health status.

Markup of this legislation is expected to begin later this week, with the goal of holding a vote before the August recess. Given the controversy surrounding healthcare reform plus the estimated $1 trillion price tag, it is questionable whether this deadline will be met. 

In related news, the Senate Health, Education, Labor and Pensions Committee voted 13-10 today along party lines to approve the Senate’s healthcare overhaul bill. This bill will need to be cleared from four other Senate committees before it can be put up for a final vote. 
 

AT&T Corporation and its affiliates, the petitioner in this case, had calculated an employee’s pension and other benefits based on a seniority system that subtracted uncredited leave time from the employee’s length of service. Employees on disability leave were given full service credit for time off, while those on “personal” leave did not. Prior to 1977, pregnancy leave was considered personal, not disability leave. In 1977, AT&T changed this policy to provide employees who took time off for pregnancy with six weeks of disability benefits and service credit. Any time off taken beyond the allotted six weeks was deemed personal, and no service credit was provided. Following the enactment of the PDA in 1978, which amended Title VII of the Civil Rights Act and made it unlawful to treat pregnancy-related conditions less favorably than other medical conditions, AT&T changed its policy to put pregnancy leave on equal footing with other disability leave for service credit purposes, but did not make service credit calculations retroactive. Therefore, the original plaintiffs in this matter were women who had taken pregnancy leave prior to the policy change, and whose retirement benefits have or would be affected. The plaintiffs’ case was eventually heard by the U.S. Court of Appeals for the Ninth Circuit, which – adhering to precedent – found that applying pre-PDA accrual rules that differentiated on the basis of pregnancy to post-PDA retirement eligibility violated Title VII.

The Supreme Court reversed the judgment of the Ninth Circuit – which conflicted with holdings by the Sixth and Seventh Circuits – noting that there was no doubt that the payment of the pension benefits in this case was the function of a bona fide seniority system, and that such systems are given a certain degree of immunity from Title VII claims. Specifically, section 703(h) stipulates that “it shall not be an unlawful employment practice for an employer to apply different standards of compensation, or different terms, conditions, or privileges of employment pursuant to a bona fide seniority . . system . . provided that such differences are not the result of an intention to discriminate because of race, color, religion, sex, or national origin.. . .” Thus, the Court reasoned, benefit differentials produced by a bona fide seniority-based pension plan are permitted unless they are the results of an intent to discriminate. The Court explained that “[b]ona fide seniority systems allow, among other things, for predictable financial consequences, both for the employer who pays the bill and for the employee who gets the benefit. . . .[a]s § 703(h) demonstrates, Congress recognized the salience of these reliance interests and, where not based upon or resulting from an intention to discriminate, gave them protection.” The Court noted that the company’s seniority system was neither adopted with the intent to discriminate on the basis of sex, nor was it unlawful when adopted.

The respondents, however, argued that the recently-enacted Lilly Ledbetter Fair Pay Act – which states, in relevant part, that “an unlawful employment practice occurs, with respect to discrimination in compensation . . . when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice” – supports their position that the benefits calculation is discriminatory. The Court disagreed, finding that since the company’s pre-PDA decision not to award the employee service credit for pregnancy leave was not discriminatory, the respondents were not therefore “affected by the application of a discriminatory compensation decision or other practice.”

Justice Souter delivered this opinion, which was decided by a vote of 7-2, with Justices Ginsburg and Breyer dissenting.