Workplace Now: The “Localization” of Employment Law – What you Don’t Know Can Hurt

It is no secret these days that many workforces, particularly over the last five years, are now subject to numerous state and municipal laws that seek to shape and regulate numerous areas of the workplace (many of which are often conflicting) .  Given the gridlock that has been in place for almost a decade in Congress, state legislatures and cities have accelerated their oversight of employers and have imposed their own laws.

In fact, there are literally hundreds of examples of how the scope of local regulation has changed, but perhaps the most breath-taking took place this year in the “City of Brotherly Love” when Philadelphia created the legal authority to shutdown a business located within its confines, for an undefined period of time, if the business “severely” or “repeatedly” violates its anti-discrimination laws under a bill signed into law on June 22, 2017.  Besides the questionable constitutionality of this law, one of the major drawbacks with respect to many  “local laws” like Philadelphia, is that they often come without any clear guidance as to exactly how they will be enforced.  For example, this ordinance provides that violations which are considered serious can subject a business to closure, but is unclear exactly what is considered serious or what number of repeated violations would lead to a business shutdown.  Besides the obvious issues for employers, risk managers and insurers should be very careful when measuring whether the traditional levels of risk and exposure will have to be readjusted in today’s workplace. To be frank, it is unclear that most HR professionals even have the local resources at their disposal to stay on top of each new development absent a system designed to constantly monitor all workplace locations on an ongoing basis.


“Ceasing the CSR’s: Once a Threat, Now A Promise”

Late in the evening of October 12, 2017, word leaked that the Trump Administration planned to finally carry out its threat to stop the Cost-Sharing Reduction Payments (“CSRs”) under the Affordable Care Act (“ACA”). The Administration confirmed the decision to cease the CSRs and published a memorandum from the Office of the Attorney General to the Secretaries of Treasury and Health and Human Services setting out the legal and policy underpinnings of that decision.

Brief Background

The ACA establishes two mechanisms to help defray the costs of health insurance premiums in the Healthcare Marketplace (“Marketplace”) for lower income individuals: (1) refundable tax credits, and (2) Cost Sharing Reduction payments (“CSRs”). Section 1401 of the ACA amended certain provisions of the Internal Revenue Code (“Tax Code”) to reduce the Marketplace premiums of qualified individuals by providing these tax credits and making them a permanent part of the appropriation provisions of the Tax Code. On the other hand, Section 1402 of the ACA requires insurance companies offering health insurance plans in the Marketplace to reduce co-payments and other out-of-pocket costs to qualified policyholders and directs the federal government to make payments directly to insurance companies to offset the impact of these reduced co-payments and costs. These Section 1402 CSRs are not linked directly to the existing Tax Code appropriations, but the Obama Administration continued to make the payments out of the federal budget, arguing that Section 1402 is inextricably linked to Section 1401 and operate in tandem to help defray the costs of obtaining health insurance in the Marketplace.


“A Strong Pull on the Threads Holding Obamacare Together:” President Trump’s October 12, 2017 Affordable Care Act Executive Order

President Trump’s Executive Order titled “Promoting Healthcare Choice and Competition Across the United States” seeks to reform certain aspects of the Affordable Care Act (“ACA” or “Obamacare”) by Executive Agency action rather than Congressional legislation. It takes specific aim at three areas:

1). Expanding small employer access to association health plans;

2). Extending the availability and duration of Short-Term Limited Duration Insurance coverage; and

3). Removing the current bar on employees using employers’ Health Reimbursement Arrangements to purchase individual health insurance.

Note that any such change requires action by various federal agencies, either by rulemaking or written guidance or both. Still, the Executive Order represents the most definitive action by President Trump to date to unwind Obamacare.

Association Health Plans

The Executive Order directs the Secretary of Labor to propose new regulations or issue written guidance within 60 days that expands the conditions under which a group of employers can meet the “commonality of interest” requirements under an ERISA Multiple Employer Plan. To date, Department of Labor (“DOL”) Advisory Opinions have defined narrowly such commonality of interests. Some approaches under consideration would allow small employers to join with employer groups on the basis of common geography or industry and do so across state lines. Other approaches include exempting self-funded Association Health Plans from certain state-mandated benefit requirements while also requiring certain minimum solvency standards. Allowing self-employed individuals to also participate in such Association Health Plans is also under consideration.


Is Gender Identity a Protected Class?

The Obama era Equal Employment Opportunity Commission (EEOC) and Department of Justice (DOJ) would have said, “YES.”  Yesterday, the Trump Administration’s DOJ answered that question with a “NO,” reversing the federal government’s stance regarding whether gender identity is a protected class under Title VII of the Civil Rights Act of 1964 (Title VII).

Attorney General Jeff Sessions communicated in a letter to all U.S. Attorneys on October 4, 2017 that Title VII does not cover bias based on transgender status.  The letter reverses a position taken by former Attorney General Eric Holder in December 2014.  Attorney General Sessions wrote, “This is a conclusion of law, not policy” and “the Department of Justice must interpret Title VII as written by Congress.”

The DOJ’s revised position on gender identity is in direct conflict with the positon taken by the EEOC.  Currently, the EEOC considers discrimination against an individual because of gender identity, including transgender status and sexual orientation, a violation of Title VII.


“Workplace Now”™

“Workplace Now” is a new quarterly report concerning the rapid changes occurring in today’s workplaces.  We will identify key areas that General Counsel, HR Professionals, Corporate Risk Managers and Insurance Professionals should consider in evaluating workplace concerns.

This four part series will examine future issues that we predict will become major areas of discussion in the years to come. Our first discussion will cover the expansion of local and state workforce laws and how employers, particularly those with national workforces, have quite literally been overtaken by these dynamic changes at the local level.

The second report will identify the expected “fallout” from artificial intelligence (“AI”), and how it will impact: corporate workforce adjustments, the evolution and selection of candidates based on an AI model, and discuss discrimination issues attendant to AI selection models.


To Dream the Impossible Dream…

On September 5, 2017, President Trump ordered an end to DACA, the Obama-era program that shields young undocumented immigrants from deportation. President Trump called DACA, the Deferred Action for Childhood Arrivals, an “amnesty-first approach.”  He urged Congress to pass a replacement before his administration begins phasing out DACA’s protections in 6 months.

The DREAM Act (Development, Relief, and Education for Alien Minors Act) was a bipartisan bill first introduced in Congress by Senators Durbin and Hatch in 2001. The original DREAM Act was created to assist individuals who originally entered the United States as children, without documentation or permission. These individuals grew up in the United States and often did not discover they were undocumented until applying for driver’s licenses or attempting to go to college. These “Dreamers” considered themselves Americans, but without a legal status they were often relegated to working in low wage jobs and prevented from seeking better opportunities.

The DREAM Act would have granted a pathway to permanent residence and eventually citizenship for the young Dreamers. Americans have overwhelmingly supported immigration reform for the past two decades, but Congress failed to pass the DREAM Act and subsequent proposed versions of the bill. In 2012, President Barack Obama addressed the young undocumented population by creating DACA  via an executive order.


$47,476 Exempt Salary Level Struck Down

Yesterday, a Texas Federal Judge invalidated the Obama era’s overtime Final Rule which attempted to raise the salary level threshold required to qualify for the Fair Labor Standards Act’s (FLSA) “white collar” exemptions to $47,476 per year.  The last year has been a rollercoaster ride for employers working to comply with the proposed doubling of the salary level and to manage labor costs.  For now, the salary basis for “white collar” exemption will remain $455 per week — or $23,660 per year.

“The department has exceeded its authority and gone too far with the final rule,” Judge Mazzant said. “Because the final rule would exclude so many employees who perform exempt duties, the department fails to carry out Congress’ unambiguous intent.”  This ruling makes permanent the preliminary injunction issued by Judge Mazzant in November 2016, just days before the Final Rule was set to take effect.  As a result of this ruling, nearly 4 million workers will remain exempt from overtime pay.

The FLSA is the federal law that governs minimum wage and overtime pay for all hours worked. Currently, “white collar” exemptions may apply where workers meet certain duties tests and are paid on a salary basis of at least $455 per week. These workers are considered exempt under the FLSA’s executive, administrative, professional, or outside sales exemptions.


Balancing Undue Hardship and Reasonable Accommodation with Employees Using Medical Marijuana Lights Up in Massachusetts Court

In a recent case, the Supreme Judicial Court of Massachusetts (the “SJC”) held that medical marijuana may constitute a “reasonable accommodation” for employees.  As a result, employers may not terminate employees for failing drug tests if the employees fall within that protection – provided the accommodation does not pose an undue hardship for the employer.

Case background:  In Barbuto v. Advantage Sales & Marketing, LLC (Massachusetts Supreme Judicial Court, July 17, 2017),   SJC considered whether an employer had violated the Massachusetts anti-discrimination statute, M.G.L. c. § 151B, by terminating an employee who had failed a drug test for using marijuana at her home to ease her symptoms of Crohn’s disease and irritable bowel syndrome.  Upon receiving the positive drug test, the employer terminated the employee – who had a duly-issued certificate from her physician authorizing the use of marijuana for those purposes – over her protests that she was medically authorized to use marijuana, which is legal in Massachusetts (effective January 1, 2013).  The employer responded that it followed the federal, not state, law on the issue.

The employee filed suit for 1) discrimination on the basis of physical handicap, 2) violation of privacy, 3) wrongful termination in light of her medically authorized use of marijuana, and 4) violation of public policy.  The trial court dismissed her complaint, and the employee appealed directly to the Supreme Judicial Court.


DOJ Backs Class Action Waivers

The United States Department of Justice (DOL) has made an about face and now takes the position that class action waivers in arbitration agreements are enforceable.   The change in position from the Trump Administration’s DOJ has gained national headlines. The Courts of Appeal are split on the enforceability of these waivers, while the National Labor Relations Board maintains they are unenforceable.

The Obama-era DOJ agreed with the National Labor Relations Board’s position that such waivers are unenforceable because they infringe on employees’ collective bargaining rights. The current DOJ, acting in accordance with the executive branch’s policy shift as a result of the presidential election, now takes the position that such waivers are enforceable unless they are inconsistent with arbitration-neutral rules of contract validity.


Alphabet Soup — Changes to the Affordable Care Act

With the new Trump administration and Republican control of Congress, there has been a lot of discussion about eliminating the Affordable Care Act and replacing it with a different set of rules.  Legislation has passed the House but not the Senate, and it appears that legislative changes are going to be much slower than anticipated.

However, there are many other changes to the ACA that do not require legislation.  Here are a few of those changes:

Rulemaking about coverage for contraception:  There have been several lawsuits about the requirement to provide contraceptive coverage if the employer is a religious organization or has moral objections. The Trump administration is in the process of issuing a broad rule that would permit for-profit companies (including publicly traded companies) to choose not to provide coverage for contraceptives if the company has a religious or moral objection.  The effect of that will be that women covered under those policies may seek to be covered under a spouse’s policy or through the exchanges in order to obtain that coverage.

Shorter sign up window for 2018: The administration has said there will be a 45 day window for sign up.  There has been less advertising.  Some commentators believe that this means fewer healthy people will sign up because only sick people will be persistent when it is more difficult to sign up.  If this is true, it could further burden the exchanges.