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Misclassifying Employees Can Have Unintended Consequences

Tuesday, February 14th, 2012

The post below is a guest blog from Joy Binkley who serves as the Principal, Health & Welfare Consultant for CAI’s employee benefits partner, Hill, Chesson & Woody.

The Internal Revenue Service (IRS) has announced a new, voluntary correction program that allows employers to reclassify employees who are currently misclassified as 1099 “independent contractors” when they should actually be reported as “W-2 paid” employees. Known as the Voluntary Classification Settlement Program (VCSP), employers who are not currently being examined by the IRS are allowed to eliminate years of past employment tax liabilities for “pennies on the dollar,” an amount equaling just greater than one percent of the wages paid to the reclassified workers for the past year.

For health and welfare benefits, employers will want to consider the compliance and contractual impacts to their plan. From a compliance perspective, it all starts with control groups and eligible employees. This impacts traditional regulatory issues such as COBRA, HIPAA, ERISA, FMLA and discrimination testing. When you add in the additional impact of healthcare reform, employers will need to consider the implications on provisions that apply to varying sizes of groups, such as “Pay or Play,” tax credits and medical loss ratios.

Of course, there is also the issue of repercussions that might be felt from employees that were previously misclassified and, as a result, were denied benefits.

From a contractual perspective, employers should be aware of the requirements the insurers or reinsurers impose. This might mean a re-rating of coverage if there are material adjustments to the covered population. With clearer definitions of employees and control groups, employers may want to tighten up their eligibility monitoring to prohibit unreported carve outs. As can be seen, all of this impacts more than just tax withholdings.

To read the expanded article, feel free to view our Eyes on Benefits monthly newsletter.

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Health Savings Accounts – 3 Situations Human Resources Professionals Should Know

Tuesday, January 17th, 2012

The post below is a guest blog from Dax Hill who serves as the Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

So, you’ve just gotten through your benefits open enrollment and you signed up for your company’s health savings account (HSA). You probably decided to take part because you know about the triple tax savings advantages of HSAs:

  1. Your money goes in tax free
  2. It grows tax free and
  3. It comes out tax free (when used for qualified medical expenses)

 Ultimately, most people who enroll in an HSA understand the basics:

  1. An HSA is used in conjunction with a High Deductible Health Plan (HDHP).
  2.  An HDHP is a medical plan that has a high deductible that you must pay fully before the insurance company pays its first dollar of coverage.
  3. For an individual, the maximum amount you can contribute to an HSA is $3,100 for 2012.
  4. For more than one covered life, the maximum HSA contribution amount is $6,250 this year.
  5. The tax-free money you deposit into the HSA must be used to reimburse qualified medical expenses.

That’s pretty straightforward. But, as an HR professional, you may find yourself in one of the following situations where the basics simply aren’t enough.

Here are 3 “what if” scenarios that might not have been covered during your enrollment:

1)“I am covered under a High Deductible Health Plan (HDHP) with employee plus spouse coverage.  My spouse is also covered under a PPO plan (not a HDHP).  How much can I contribute to my 2012 HSA?”

In this scenario, the individual may contribute the $6,250 tax free.  The contribution amount is based on the coverage election (employee plus spouse), even though the spouse has non- HDHP coverage. 

2) “I am covered under an HDHP and my husband is covered under Medicare. Can my spouse be covered under my HDHP?  And, if so, can I can use my HSA to reimburse medical expenses for my spouse?” 

In this situation, the individual spouse can participate in the HDHP.  In addition: 

For Medicare premiums:  The HSA can reimburse Medicare premiums if the account holder is 65 or older, but cannot be used to reimburse Medicare supplement policy premiums.  So, the employee could use her HSA money to reimburse for her spouse’s Medicare premiums as long as the employee is age 65 or older.  Otherwise, the Medicare premiums cannot be reimbursed tax-free.

Other Section 213(d) qualified expenses:  The employee can reimburse her spouse’s qualified medical expenses even if the spouse has Medicare, provided that the expense has not already been reimbursed by Medicare or other insurance.  So, once Medicare pays the expense, any remaining portion unpaid could be reimbursed by the HSA.  

3)“Can I use my HSA account for my children if they are not covered under my HDHP Plan?”

Yes, you can reimburse the children’s qualified medical expenses provided that the children are Section 152 tax dependents and the expense has not been reimbursed by other insurance.  So, once the insurance policy pays the expense, any remaining portion unpaid could be reimbursed by the HSA. 

A section 152 tax dependent for a child is generally defined as a child who is under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student for at least five months of the year. In addition, the dependent could be permanently and totally disabled at any time during the year and qualify under section 152.

Confusing tax codes, contribution limits and other factors can sometimes make simple concepts more difficult to understand. What questions have you had regarding your employer’s benefits plans?

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Healthcare Reform Likely to Encourage Employers to Consider Self Funding

Tuesday, December 20th, 2011

The post below is a guest blog from Mike Beck who serves as the Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

Provisions of the Patient Protection and Affordable Care Act (PPACA) are causing shifts in the marketplace on all sides of the issue. Insurance carriers, employers, providers and consumers are each reacting to the government’s regulations that are designed to get everyone insured, control costs and improve health outcomes.

Three specific provisions of reform — medical loss ratio, the modified community rating and guaranteed issue of medical plans — will encourage organizations to consider a move away from fully insured funding to self insurance. Currently, only 13 percent of organizations with less than 100 employees fund their employee health plans in a self funded manner.

Because healthcare reform is reducing competition in the market place, an environment of rising healthcare costs is being fostered. Since reinsurance carriers are not bound by loss ratios or modified community ratings, employers with healthy employee demographics that shift from a fully insured medical plan to a self funded plan potentially will be able to improve their cost position and have more plan design flexibility.

Based on the current PPACA regulations, we believe more small employers will explore self funding as an option. Taking into consideration your organization’s demographics, risk tolerance and goals for self funding is a necessary step that will ultimately determine if this type of funding is a viable option to stem the tide of healthcare reform.

For more information or to discuss your organization’s funding type, please call Hill, Chesson & Woody at (919) 403-1986.

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Onboarding Strategies for Getting Seasonal Workers Up to Speed

Thursday, December 1st, 2011

The post below is a guest blog from Kyle Lagunas.

Kyle Lagunas is the HR Analyst at Software Advice. On the surface, it’s his job to contribute to the ongoing conversation on all things HR. Beyond that, he makes sure his audience is keeping up with important trends and hot topics in the industry. Focused on offering a fresh take on points of interest in his market, he’s not your typical HR guy.

During peak periods – around the holidays, tax season or over the summer – it’s critical that businesses can easily manage the addition of temporary employees and quickly get them up to speed. And from recruiting and training to offboarding, seasonal employees can put your human resources software and processes to the test. Not only do you have to find and hire the right people, you have a very short time to train them and get them connected to your organization.

An effective, streamlined process for hiring and onboarding employees is essential to any organization’s success – especially those that rely on seasonal help. Here, I’ve outlined a few ways to go above and beyond your normal onboarding process to get seasonal employees geared up and ready to go.

Employee Integration: The Heart of Onboarding
According to ForbesWoman columnist and onboarding expert Emily Bennington, every employee in an organization should be integrated into the company on several levels – regardless of the length of employment. But because of the time constraints associated with onboarding seasonal workers, you’re going to need a concentrated game plan. How familiar with your products do they need to be to handle the register? Take a look at your existing onboarding process, and then adjust and condense it so you can achieve your optimal level of integration.

5 Key Factors of a Strong Seasonal Workforce
Some people may assume I’m focused on training when I say “onboarding,” but the fact is that the employee experience starts in the recruiting stage. With this in mind, here are a few key strategies to help you throughout every phase of the process:

Tailor your recruiting strategies. Your recruiting efforts should be tailored to meet the specific needs of a seasonal workforce. It’s important to make the details of the opportunity clear from the get-go. I would also be wary of how you communicate potential for further employment, as you don’t want folks making assumptions.

Perform due diligence. Don’t skimp on due diligence in collecting legal papers and monitoring employees’ schedules. “A lot of people short-circuit processes like verifying work eligibility or tracking hours correctly. It should go without saying, but you really need to be sure you’re following the law,” says John Rossheim, a senior contributing writer at Monster.com.

Provide proper training. According to Bennington, onboarding should focus on integrating new employees in three areas:

  •  Technical Skills: To what depth of expertise do seasonal employees need to be trained to perform their jobs?
  • Company Culture: How thoroughly do seasonal hires need to understand company policies and values?
  • Social Integration: In what ways can you connect seasonal employees to your organization so they feel like they are part of the team?

Furthermore, Rossheim suggests designing your seasonal workforce “to accomplish the task at hand, rather than haphazardly training everyone to do everything they may possibly have to do. Specialize rather than throwing everyone into the same bucket.”

Know your capacity upfront. Whether you have a general human resources management system or a hodgepodge of spreadsheets and checklists – it’s important to know your capacity. Can your back-office system efficiently handle an increased volume in applicants and new hires?

Make them part of the team. Seasonal employees can easily feel isolated if an onboarding program doesn’t successfully connect them to the organization. According to Eddie Baeb of Target Corportate Communications, Target is focused on engaging seasonal employees and making them feel just as valued as anyone else from day one. With nearly 40 percent (about 35,800) of seasonal team members joining as permanent employees last year after the holidays, they’ve got this down.

Offboarding Offers an Opportunity for Improvement
You may have discovered a few star performers you’d like to bring onto your team permanently. For the rest, though, Bennington says “there’s definitely an opportunity to establish brand ambassadors.” Offboarding provides a chance to make a lasting positive impression while gaining insight into the worker’s experience.

Standard offboarding practices include surveying workers on their experience. Bennington suggests going beyond surveying and having one-on-one exit interviews with select employees to get more candid responses.

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Form 5500? Huh?

Tuesday, November 15th, 2011

The post below is a guest blog from Zach Nichols who serves as the Triad Regional Manager for CAI’s employee benefits partner Hill, Chesson & Woody.

Are you tired and ready for the holidays?  Almost 65% of you have recently completed your benefit renewals and hope to move forward in 2012 with a few less gray hairs.  Once things get going in the first quarter, who’s in charge of filing your Form 5500s?  “Form 5500 what?” you might ask.  “I heard you say something about 5500. Is that a new Holiday bonus I’m getting this year?”

Well, for those of you who are compliant, this isn’t a big deal. You already know what it is and who is responsible for filing it.  Shockingly, according to the Department of Labor, almost 47% of employers in the United States are non-compliant when it comes to filing their 5500s.  Since almost half of employers have never heard of Form 5500 or don’t understand its importance, here’s a quick rundown of what it is and how it pertains to your organization.

Plan sponsors who maintain qualified employee benefit programs such as pension plans, 401k plans or Health & Welfare plans generally must file an annual report with the Employee Benefits Security Administration/Department of Labor. This annual report, known as a Form 5500, is due within seven (7) months after the end of a plan year. 

The Form 5500 Series is part of ERISA’s overall reporting and disclosure framework, which is intended to assure that employee benefit plans are operated and managed in accordance with set standards. It also assures that participants and beneficiaries, as well as regulators, are provided or have access to sufficient information to protect the rights and benefits of participants and beneficiaries under employee benefit plans.

“Okay, you got me. I need to be filing this but my broker never told me!  How do I become compliant?”

The Department of Labor (DOL) has eased the penalties for late or missing Forms 5500 substantially by implementing the Delinquent Filer Voluntary Compliance Program (DFVCP). Under this program, sponsors will face a penalty of $10 per day up to a maximum of $750 for small plans and $2,000 for large plans (if a plan’s 5500 filing has been missed for multiple years, the penalty cap is $1,500 for small plans and $4,000 for large plans, regardless of the number of late filings submitted).  Given the statutory ability of the DOL to assess up to $1,100 per day in civil penalties, this provides a significant incentive to correct past failures to file. If the DOL determines that the Form 5500 reporting requirement was willfully avoided, fines can reach $100,000 per plan so the $2,000 DFVCP is a no brainer!

So, no, the 5500 you heard about isn’t that new Holiday bonus you were hoping for. But, it’ll ensure the DOL isn’t getting an extra holiday bonus courtesy of your organization.

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CAI’s Experts Take the Confusion out of Affirmative Action Planning

Thursday, November 3rd, 2011

Madison Upton (left), Kaleigh Ferraro (right)

In October CAI’s Affirmative Action Plan (AAP) Experts, Kaleigh Ferraro and Madison Upton, hosted a free webinar to educate current and future government contractors on the basics of creating a compliant AAP. The team compiled a list of questions most frequently asked by organizations that are required to have a written AAP. If your company has 50 or more employees and holds a federal government contract or subcontract of $50,000 or more, read the answers below to make sure your organization stays compliant.

 

AAP Frequently Asked Questions

1.     When do we have to turn in our AAP?

Contractors and subcontractors are required to develop AAPs annually. AAPs are not submitted unless your company is selected for an audit.

 

2.     Are there specific qualifications for employees that must be included in our AAP?

All full-time and part-time, regular employees must be included in AAP reports. Employees on short-term leave or military leave should be included as well. Temporary employees, such as co-ops and interns, are not typically included in AAPs.

 

3.     How long do we need to keep our AAPs?

Contractors need to keep their current AAP and their AAP from the previous year.  All others may be discarded. However, if your organization is under audit, you must maintain all existing AAPs and accompanying reports until the audit’s conclusion. For example, if you are audited, and it takes three years from today to close the investigation, you must maintain your AAPs from 2010, 2011, 2012, 2013 and 2014, as well as pertinent employment records.

 

4.     What if employees or applicants choose to not disclose their race, ethnicity, gender, disability status or veteran status?

Government contractors and subcontractors are required to develop reports that use race and gender employee information. These organizations must solicit race and gender information from applicants and employees, but individuals may choose to not disclose this information, as it is voluntary to self identify.

Organizations are allowed to visually identify applicants and employees who do not self identify themselves so they can be included in AAP reports and/or EEO-1 reports. The OFCCP suggests that members of HR or managers make the visual identifications.

Contractors are not obligated to guess the race, ethnicity or gender of people who apply online or through resume and decline to self identify. If the applicant is interviewed, then a contractor may visually identify the candidate in person.

 

5.     How does the OFCCP choose companies to audit?

The OFCCP maintains a listing of federal contractors and uses the Federal Contractor Scheduling System (FCSS) and “administratively neutral selection criteria” to choose organizations that will be audited. Items that are considered by the FCSS may include EEO-1 reports, establishment size, random sampling of contractors and mathematical models that compare workforce profiles with other establishments in the same industry and labor market.

The OFCCP typically sends out audit scheduling letters twice a year.  The OFCCP regional offices notify approximately 2,500 establishments in early October, and a second list of approximately 5,000 establishments in early March. Organizations that are not in the FCSS can be selected for audits as well.  These organizations may include corporate offices, approved functional AAPs, or companies with credible reports of alleged violations of laws and regulations. If an organization is selected for an audit, it will not be selected again for 24 months.

 

6.     How should we respond to an audit letter?

When the OFFCP mails a scheduling letter to a contractor or subcontractor, the organization has 30 days to respond to the letter. The scheduling letter will request information, such as the written AAPs, compensation data and personnel activities, which include hires, applicants, promotions and terminations.

 

7.     What types of penalties can the OFCCP assess during an audit?

The OFCCP can collect compensatory and punitive damages, which are often the result of back pay for candidates who are not selected, or unexplained salary differences between employees. Organizations may also agree to conciliation agreements that may result in additional submitted reports.

 

8.     We are a subsidiary of a parent company.  We do not have any contracts, but our parent company does.  Are we a contractor and therefore subject to AAP regulations?

The OFCCP uses the NLRB test of common ownership to determine if a subsidiary is covered. If your organization fits one of the characteristics below, you are required to complete an AAP.

  • Interrelation of operations – there are common services provided between companies, such as insurance, retirement policies, federal tax ids, etc.
  • Centralized control of labor relations – all locations are subject to identical or similar personnel policies, which are determined by the corporate office. These policies include decisions to hire, promote, terminate, etc. All decisions must be approved by corporate headquarters.
  • Common management – the multiple locations share officers, boards of directors, presidents, etc. Subsidiary facilities are not independent in functions concerning operations, pay, benefits, etc.
  • Common ownership or financial control – the parent company and subsidiaries are owned by the same organization.

 

9.     Are we required to submit all of our organization’s job openings with the state job service?

Yes, contractors who hold contracts of $100,000 or more must list all job openings with the state job service.  North Carolina requires all open positions to be listed with the NC Employment Security Commission, but there are three exceptions to this regulation:

  • Positions soliciting executives and senior management candidates
  • Positions that will be filled internally
  • Positions that will last fewer than 3 days

 

10.   We post our open positions on internet jobs boards, so we receive a lot of interested candidates. Do we have to regard everyone who applies as an applicant for consideration in our analysis?

No, the OFCCP issued an Internet Applicant Rule to address the issue of recruiting through online sources.  In order to be an internet applicant, a candidate must satisfy the following four criteria:

  • Individual submits interest in employment through internet or other electronic data technology
  • The contractor considers the individual for employment
  • The individual possesses the basic qualifications for the position
  • The individual does not withdraw himself or herself from consideration

 

For additional answers to your AAP questions, please contact one of CAI’s AAP experts: Kaleigh Ferraro at Kaleigh.Ferraro@capital.org or Madison Upton at Madison.Upton@capital.org. You can also reach Kaleigh or Madison at 919-878-9222 or 336-668-7746.

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Employers, Don’t Be Overzealous with Your Wellness. Beware of the ADA and Everything Else.

Tuesday, November 1st, 2011

The post below is a guest blog from Robin Shea who serves as Partner for Constangy, Brooks & Smith, LLP, CAI’s Partner for the 2011 Triad Employment Law Update.

Do you want a healthy workforce? Of course! But don’t overdo it. A too-aggressive wellness program may make your company sick in the long run.

Employers and their insurance companies love wellness programs. They result in reduced premiums as well as (presumably) fewer big-money claims because they encourage employees to take better care of themselves.

Many employers offer “carrots” to employees to participate in wellness programs. There is no legal problem with “positive” incentives as long as certain requirements are met.

But some employers wield a “stick” as well. They actually penalize employees who refuse to participate. The City of Chicago has recently announced a wellness program that will require employees to pay $50 a month to opt out. That’s a lot of money for most people. Can penalties like this cause problems for employers? The issue isn’t settled, but I have some concerns. 

1. The ADA. First, the Americans with Disabilities Act (even the “old” version) does not allow employers to ask for medical information from current employees unless the request is “job-related and consistent with business necessity.” This usually means that there has to be a job-related problem that might be related to a medical condition, or perhaps a doctor’s note saying that the employee cannot perform his or her duties because of a medical condition. The employer generally cannot ask for medical information without a reason. Even when there is a good reason to ask, the medical inquiry must be confined to the work-related issue.

(For example, if an employee in a heavy-lifting position claims a bad back, the employer cannot require him to get a complete physical.)

The ADA does have an exception for medical information collected pursuant to a voluntary wellness program. But if the employer is hitting individual employees for as much as $50 a month if they decline to participate, how “voluntary” is that program?

At least two courts have found that “negative reinforcement,” such as Chicago’s, falls under a different exception in the ADA: the section that deals with “bona fide benefit plan[s] that are based on underwriting risks, classifying risks, or administering such risks that are based on or are not inconsistent with state law” and that are not a “subterfuge” to evade ADA compliance.

In one case, decided in 1998, the court upheld termination of an employee for insubordination who refused to provide medical information. In the other, decided this year, the court upheld a biweekly $20 deduction from pay for employees who chose not to participate in the wellness program. In other words, both of these courts found that the “voluntary wellness” exception wasn’t even an issue because wellness programs connected with health insurance plans fell within a completely different exception to the ADA’s prohibitions on medical inquiries.

With all due respect to these courts, I have a question: If every wellness program associated with a health insurance plan is automatically excluded from the ADA’s general prohibition on medical inquiries, then why does the ADA even have the “voluntary wellness” provision? Aren’t these courts effectively reading that provision right out of the ADA?

Another ADA concern I have is the fuzzy line (getting fuzzier every day) between lifestyle choices and actual or “regarded as” disabilities within the meaning of the ADA. If, say, someone who really likes food develops a weight problem, then she may become a “disabled” individual within the meaning of the ADA, and especially as amended by the ADA Amendments Act. It was reported this week that our friends at the U.S. Equal Employment Opportunity Commission (EEOC) filed suit against an employer for terminating a morbidly obese employee because of his obesity. The EEOC is contending that the employee’s obesity is a “disability” within the meaning of the ADA Amendments Act and that the company refused to consider reasonable accommodations, such as transfer to a job with lighter physical demands. (The company has thus far declined to comment, so all we have right now is the EEOC’s side of the story.)

Even alcoholism is a “disability” entitled to an intermediate level of ADA protection.

So there are some reasons I worry about employers who are too “enthusiastic” about promoting wellness. In any event, the ADA isn’t the only law that employers have to worry about.

2. “Lifestyle” or “lawful products” statutes. A number of states have so-called “lifestyle protection” or “lawful products” statutes, which essentially prohibit discrimination against applicants and employees based on lawful activities engaged in, or use of lawful products, during non-working hours. Even the narrower “lawful products” laws protect smokers as well as, presumably, drinkers, gourmands, skydivers (parachutes are “products,” aren’t they?), bungee-jumpers (bungee cords are “products,” aren’t they?), and other individuals who engage in risky but legal behavior. Yes, these laws usually contain exceptions, but employers need to be aware of their existence and make sure that what they’re doing fits into one of the exceptions.

There has been a lot of publicity lately about certain employers who have refused to hire anyone who smokes. One should assume that these employers are in states that do not have “lawful products” statutes. Don’t think that you can do it just because they did. If your friends all jumped in the lake, would you do it, too?

3. The GINA. Title II of the Genetic Information Nondiscrimination Act prohibits employers from ”using, acquiring, requiring, or disclosing genetic information” with certain strictly defined exceptions. It also prohibits discrimination against individuals based on their genetic information. The statute defines “genetic information” so broadly that any family medical history information about the individual’s first four degrees of kinship — plus spouses and adopted children – is included.

The GINA has some exceptions for genetic information disclosed in connection with voluntary wellness programs, but the GINA provisions focus on the right of the employee to decline to answer questions that seek “genetic information.” (In other words, the GINA regs say it is all right for a wellness program to request ”genetic information” as long as individuals aren’t excluded from the program if they decline to answer questions asking for “genetic information,” the ”genetic information” requests are segregated from other requests, clear disclaimers are provided, and other requirements are met.) If the wellness program is not truly “voluntary,” then arguably the GINA’s permissive provisions would not apply.

The moral of the story: don’t be overzealous with your wellness! Reasonable minds differ on this subject, but in light of the ADA(AA), state laws, and the GINA, I recommend that employers keep the focus “positive” and avoid punishing those who continue to burn the candle at both ends.

CAI’s 2011 Triad Employment Law Update, scheduled for November 9 at the Koury Center in Greensboro, will provide additional information on ADA and how to handle the off-duty conduct of employees.  The conference will also provide news and material on several legal topics relevant to employers, including Wage and Hour, Workers’ Comp Reform, FLSA and Immigration. Register today at www.capital.org/triadlaw.

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Lack of Attention to Extended Leave Policies Can Be Costly

Thursday, October 27th, 2011

The post below is a guest blog from Jenn Hargiss who serves as a Client Coordinator for CAI’s employee benefits partner Hill, Chesson & Woody.

You offer a more generous leave policy than the Federal requirements of the Family Medical Leave Act (FMLA).  Big deal, right?  While this may not sound like anything unreasonable, does your health insurance carrier or reinsurance (stop-loss) vendor agree with your decision to allow employees to continue coverage outside of COBRA under your company health plan for an extended period of time?

Medical Insurance Carriers and reinsurance carriers follow strict federal guidelines, especially with FMLA and COBRA.  If an employer allows an extended leave period, including health plan coverage continuation (Non-COBRA) after the 12-week (or 26 week) FMLA maximum has been exhausted, then the employer loses the protection of the group health plan and reinsurance policies.  In essence, the employer just became fully self-funded; paying all the medical claims incurred under the terms of the medical plan after FMLA was exhausted for each individual.  Ouch! 

If claims are incurred, an employer may end up with many very large, unbudgeted claims and legal expenses.  Plus, an untimely offering of COBRA continuation after the fact may not satisfy the health insurance or reinsurance carrier contract provisions and certainly opens up the employer for expensive COBRA rights violations.

Take action to avoid finding your company in an unfavorable legal and financial position:

  1.  No policy is a bad policy.  What is the company policy?  Understand when health benefits are supposed to end to avoid a dispute should the employee not return to work at the end of the leave.  Not only should the health contracts be reviewed, but also dental, vision, life and disability.
  2. Check your policies, procedures, and handbooks.   Make sure the company is not making promises to continue coverage that doesn’t coordinate with the health insurance and reinsurance contracts.  Make it clear when coverage ends and when COBRA coverage will begin.
  3. Negotiate with the health insurance or reinsurance carrier to amend the contract and add the appropriate language around continuation of coverage after exhausting FMLA if the policy is more generous than Federal Regulations require.
  4. Review contracts annually.  Make sure when changing carriers, the policy is submitted for approval and the new contract is updated with the appropriate language.

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5 Egregious Errors that Endanger Employment Investigations

Tuesday, October 18th, 2011

The post below is a guest blog from Robin Shea who serves as Partner for Constangy, Brooks & Smith, LLP, CAI’s Partner for the 2011 Triad Employment Law Update.

Now that the Supreme Court has officially recognized “cat’s paw” liability for employers whose decisions are tainted by an individual with an unlawful motive, it is more important than ever for employers to conduct workplace investigations that are above reproach.

And because it’s more fun to talk about mistakes than what people do well, I’m going to focus on five workplace investigation errors that I see regularly.

Error No. 1. The man* who knew too much. This is a very common mistake when the investigator is someone from the same worksite as the individuals involved, and knows the “cast of characters.” ”TMI” is not a good thing. Hear me out. The problem is that someone who already knows the cast of characters can have a very difficult time keeping an open mind.

*The masculine shall be deemed to include the feminine, and vice versa.

Ideally, a workplace investigation will be done by someone from outside who can investigate objectively. But if the investigation absolutely must be done by someone who knows everyone involved, the investigator should keep in mind the cliche, “Even a stopped clock is right twice a day.” Just because the complaining employee is a known drama queen and the accused is a thrice-decorated war hero who rescues little kitties from the tops of trees and gives all of his money to the poor (or the complaining employee is a lovable Sunday school teacher who drives only 15 miles a week, and the accused is Tiger Woods), it is possible that, in this case, just this once, the roles are reversed. OK, probably not, but at least as an investigator you should keep that attitude to the best of your ability. You can turn your brain back on when it’s time to assess your evidence and determine what really happened.

Error No. 2. Dangling leads. I cannot tell you how many times I’ve been asked to review an employer’s investigation, and the notes say, “Joe didn’t see Bill make a pass at Mary, but he said that we should talk to Susan, who works in the same area and might have seen something.” I scour through the rest of the notes to find the interview of Susan, to no avail. The reason? Nobody followed up on Joe’s suggestion that Susan be interviewed. Fortunately, we usually catch this type of thing while there’s still time to go back to Susan and find out what, if anything, she knows. But companies shouldn’t have to waste precious legal fees hiring lawyers to point out such obvious omissions to them. (Save us for the hard stuff!) Investigators need to follow all leads provided by the accuser, the accused, and the witnesses. If they don’t, and if the mistake isn’t corrected before there is an EEOC charge or lawsuit, you can bet the government/plaintiff’s lawyer will use the lack of follow-up to its/his/her advantage.

Error No. 3:  Accepting conclusions as “facts.” Another mistake I see all the time. Investigator asks, “Is Tifanyea sexually harassing the men she works with?” Amber replies, “I feel that Tifanyea is very inappropriate with the guys.” Or my personal favorite: “Oh, you know, Tifanyea is Tifanyea.” These are not facts. These are conclusions, and they don’t tell you anything. A good investigator will say, ”Amber, tell me what Tifanyea does with the guys that you consider inappropriate,” or  ”Tell me what you mean when you say Tifanyea is Tifanyea.” If the investigator doesn’t do it, you can be sure that the EEOC or a plaintiff’s lawyer will.

This, by contrast, is a factual statement: “Yesterday, I overheard Tifanyea telling Dave that his jeans really made his butt look cute. Dave turned bright red and walked away.” Or this: ”Every day, Tifanyea is talking about how ‘hot’ Steve is. Steve never says anything to her, but he’s told me several times that he is uncomfortable and tries to avoid her.”

See the difference? Now you have some information! 

Error No. 4: “You don’t wanta get mixed up with a guy like me, Pee-wee. I’m a loner. A rebel.” And you know those “Do not remove under penalty of law” tags they put on mattresses? Well, I cut one off! (Sorry – I got carried away.) In all cases, and especially if the investigation is conducted by the man* who knew too much (see Error No. 1), someone else ought to review the findings of the investigator to make sure that all leads have been followed (see Error No. 2) and that conclusory statements have been supported by facts (see Error No. 3), and that there is adequate factual support for the preliminary conclusion of the investigation. The reviewer should also assist in determining what really happened and what the appropriate action should be. The reviewer ideally should be an in-house attorney, a corporate-level Human Resources professional, or an outside attorney, preferably with expertise in employment law. He or she should also be someone who is not personally involved with the cast of characters, or only minimally involved. 

Error No. 5: “We will keep everything you say strictly confidential. Except, of course, when we talk about it.” It is impossible to keep an investigation completely confidential. You cannot interview accused parties or witnesses without disclosing at least some of the reason for asking the questions. If you tell an employee that everything will be kept confidential, and then she finds out that you’ve been talking, she is rightfully going to be ticked off at you. Better to say, “We will keep everything that you say as confidential as we can, but of course we may have to talk about this with other people involved in the investigation. I can assure you that we will not discuss this with anyone who doesn’t have a legitimate need to know.” Employees are not stupid. They will understand and will appreciate your honesty.    

CAI’s 2011 Triad Employment Law Update, scheduled for November 9 at the Koury Center in Greensboro, will provide additional information for conducting successful employment investigations.  The conference will also provide news and material on several legal topics relevant to employers, including ADA, Wage and Hour, Workers’ Comp Reform, FLSA and Immigration. Register today at www.capital.org/triadlaw.

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The EEOC’s 5 Warnings about Medical Leaves and the ADA

Tuesday, October 11th, 2011

The post below is a guest blog from Robin Shea who serves as Partner for Constangy, Brooks & Smith, LLP, CAI’s Partner for the 2011 Triad Employment Law Update.

Leave of absence as a reasonable accommodation under the Americans with Disabilities Act is a smokin’ hot subject these days, particularly in light of the ADA Amendments Act and its regulations, which expand the ADA’s coverage to a dramatically larger population, the “new,” more activist U.S. Equal Employment Opportunity Commission (EEOC)  under Chair Jacqueline Berrien, and two recent multi-million-dollar settlements in leave-of-absence lawsuits brought by the EEOC against Sears, Roebuck & Co. and Supervalu, Inc. (Jewel-Osco).

John Hendrickson, the EEOC’s Regional Attorney for Chicago, said that these settlements contained five lessons for employers, and that’s what I’d like to talk about today because Hendrickson’s points are consistent with warnings we’ve been giving to employers for quite some time.

1. An “inflexible period” of leave will not satisfy ADA requirements. Most of the employers I’ve worked with have very generous leave of absence policies — one employer I know offers up to two years of leave for a single medical condition (and possibly more, if the employee contracts a new condition). However, many policies provide for “automatic” termination if the employee’s leave exceeds the designated period of time.

Nunh-unh, no can do, says the EEOC.

If the employee needs, say, two years plus two weeks, but then will be able to return to work, you have to consider granting that additional two weeks.

Or, if the employee can come back but needs reasonable accommodations (including reassignment to a vacant position), you have to consider allowing the employee to come back in the new capacity.

And when I say “consider,” I mean, seriously. I mean, if you decide to say no, you’d better have a darned good reason.

Your next question may be, Well, if our leave is so generous and we still have to do all this when an employee has been out of work (and probably receiving disability benefits or workers’ compensation), then why on earth do we want to offer so much leave in the first place? And my answer to that would be, Good question, and a point that was made by an employers’ lawyer who testified at the EEOC hearing. You can shorten the “maximum leave” under your policy, as long as you comply with the requirements of the Family and Medical Leave Act. (You should check applicable state laws, as well.)

2. “Appropriate leave” requires an “individualized assessment” when the designated leave period expires, if not before. See #1. The “individualized assessment” would include determining whether the employee needs additional leave beyond the official company maximum, and whether the employee can come back to work with a reasonable accommodation.

Many employers still require employees returning from medical leaves of absence to be “100 percent recovered,” or able to return to work without restrictions. These requirements have arguably violated the ADA from the get-go (in my opinion, they have), but there is no question that they should be scrapped in our modern era. If an employee has restrictions, the employer is supposed to assess whether the employee can return to work with a reasonable accommodation. If not, then it may be ok to terminate. But if so, then the employer should allow the employee to return to work.

And, have I mentioned that “reasonable accommodation” includes reassignment to a different vacant position?

3. Keep your friends close, and your leave administrator and ADA decisionmaker closer. Many employers outsource leave administration to a third party. Meanwhile, the person making decisions on ADA accommodations is usually someone in Human Resources, in consultation with the employee’s supervisors and managers, and possibly legal counsel.

This is a fine arrangement, as long as the leave administrator stays in close contact with HR or legal counsel, and knows how to identify potential ADA issues. (Which should be a cinch now that virtually everyone on an extended medical leave qualifies for ADA coverage.)

That said, third party administrators, or even in-house leave administration “specialists,” should almost never be the ones to terminate an employee for hitting the maximum allowable leave. A best practice would be for the leave administrator to refer these employees to Human Resources or legal counsel for an ADA assessment. The decision to terminate, extend leave, or bring back to work with or without reasonable accommodations should be made by HR/Legal in consultation with the appropriate operations management.

4. Ya gotta talk to the employee. The reasons for this rule are too numerous to mention. From a pure morale standpoint, it’s always good to stay in touch with an employee on medical leave because it makes the employee feel that she’s still “part of the family” and makes return to work that much easier. But just in case these warm and fuzzy reasons aren’t enough to satisfy you, allow me to use more persuasive methods. (Imagine Dr. Evil laugh here. Mwahahaha.)

Many jurisdictions require that the employer and employee conduct an “interactive process” when discussing possible ADA accommodations, and the EEOC takes this position as well. The “interactive process” is fancy-lawyer-talk for having a discussion with the employee (ideally, face-to-face, but phone or email will suffice if the employee can’t come in) about possible reasonable accommodations. In these jurisdictions, the failure to engage in the interactive process is an ADA violation in itself.

Even in jurisdictions like mine, which do not require an interactive process, failing to engage in the process means that the employer “assumes the risk” if there is an accommodation that might have worked but was missed because the employer didn’t talk to the employee.

For these reasons, I strongly recommend that all employers, no matter where they are located, discuss directly with employees their reasonable accommodation options and get the employee’s suggestions. (Employers with unions will, of course, have to include the union representatives in these discussions.)

5. Better get used to being sued by the EEOC. The agency believes that private plaintiffs’ attorneys will not usually have the resources to be able to pursue these “systemic” discrimination cases involving automatic terminations at the end of medical leaves. 

So, to paraphrase all those spam email jokes that we love so much, you may be a defendant in an EEOC lawsuit if

*You have a “100%-recovered/no restrictions” requirement for return from a medical leave of absence;

*You automatically terminate employees who reach their maximum leaves without making “individualized assessments”;

*You delegate all of your medical leave terminations to your third-party administrator, or your benefits administrators; or

*You don’t engage in “the interactive process” before automatically terminating employees who reach their maximum leaves.

(Sorry that wasn’t the least bit funny. Hey – just like the spam email jokes!)

Generally speaking, the EEOC is a formidable plaintiff. Unlike private plaintiffs’ attorneys, the agency does not have a strong economic motivation to settle cases early and inexpensively. They’ll serve you with aggressive written discovery and requests for documents, and they’ll want to take everybody’s deposition. They’ll file motions and fight every motion that your side wants to file. They dig “systemic” cases, where they can get large verdicts or settlements that they can post on their “Newsroom” web page. This is not to say you can’t beat them, but most employers will prefer being in compliance to being a test case.

Forewarned is forearmed, as they say.

CAI’s 2011 Triad Employment Law Update, scheduled for November 9 at the Koury Center in Greensboro, will provide additional information for staying compliant with FMLA and ADA regulations.  The conference will also provide news and material on several legal topics relevant to employers, including Wage and Hour, Workers’ Comp Reform, FLSA and Immigration. Register today at www.capital.org/triadlaw.

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