Relief for Taxpayers Affected by the Reduced 2018 HSA Deduction Limits

The IRS recently released guidance providing that taxpayers may, for 2018, treat $6,900 as the maximum deductible health savings account (“HSA”) contribution for family coverage under a high deductible health plan. This change is relevant to employers who sponsor a high deductible health plan and individuals who have contributed or have had contributions made on their behalf to an HSA for 2018.

As you may recall, the maximum had been abruptly reduced earlier this year to $6,850 as a result of a change in the inflation adjustment calculations under the Tax Cuts and Jobs Act. The new IRS relief comes in response to reports of administrative and financial burdens triggered by the mid-year change, which left individuals, employers and administrators scrambling to respond as HSA participants who either had already made the maximum HSA contribution for 2018 or elected to make pre-tax HSA contributions based on the $6,900 limit faced potential tax penalties due to excess contributions.

Employers who have already adjusted deferral elections made under a cafeteria plan to reflect the inflation-adjusted $6,850 maximum need not take further action. However, individuals who receive distributions of excess HSA contributions based on the inflation-adjusted $6,850 maximum will have a choice to make as to whether they want to repay that amount to their HSAs, rely on an exclusion from gross income afforded to a return of excess contributions or, if attributable to employer contributions, apply the distribution to qualified medical expenses. Employers who sponsor a high deductible health plan may want to inform their employees of this issue either directly or through their relevant service providers.

To read the advisory on the Kelley Drye website, click here.

Has the California Supreme Court Doomed the Gig Economy?

On Monday, the California Supreme Court adopted a new standard for determining whether a worker qualifies as an employee for the purposes of wage-hour law. To the surprise of almost no one, the standard does not bode well for many companies operating in the Golden State.

In a highly-anticipated opinion, Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court held that in order for a worker to be properly classified as an independent contractor rather than an employee, the company bears the burden to show that the individual is performing work that is “outside of the hiring entity’s business.” This standard threatens to put an end to much of the independent contractor workforce in California.

The Court adopted what is known as the “ABC” test of evaluating whether workers classified as independent contractors in fact qualify as employees. The test starts with the presumption that all workers are employees, and utilizes three factors, all of which must be satisfied for an independent contractor classification to pass muster. The first factor – whether the worker is “free from the control and direction” of the company – essentially reflects the current legal standard and is not controversial. Continue Reading

The New Jersey Paid Sick Leave Law is Here

(This blog post was updated 5/2/2018 to reflect changes in the law that was enacted.)

On March 26th, the New Jersey Assembly passed legislation that requires employers in New Jersey to provide earned sick leave to their employees. The legislation was then passed by the New Jersey Senate on April 12th, and Governor Phil Murphy signed it into law on May 2, 2018. He tweeted out that he believes that enacting the law will “support working families and strengthen our economy.”

What is the New Law?

The new Paid Sick Leave law allows New Jersey workers to accrue paid sick leave for every 30 hours worked. The number of hours of leave that can be accrued per year is capped at 40 hours. There is no minimum amount of time an employee must be employed before they are able to start accruing paid sick leave. Employers are required to give employees the same pay rate and benefits for earned sick leave that the employees would regularly receive for working hours. Employers may offer to pay workers for their unused earned sick leave in the final month of the year. The sick leave can be used for physical and mental illness, to care for an ill or injured family member, to attend a school-related event for a child, to obtain services if the employee or a family member is a victim of domestic or sexual abuse, or circumstances arising from a public health emergency. Employers are prohibited from retaliating or discriminating against an employee for using their paid sick leave. Employers also must not discipline, discharge, demote, suspend, or take any other adverse action against employees who are using their sick leave.

Why was this Law Enacted?

The intent of the new law is to ensure an employee does not have to choose between a paycheck and going to work sick. Governor Murphy tweeted “No one should lose a day’s pay due to sickness or because a loved one has fallen ill.” When signing the bill he stated, “There is no reasons anyone should have to choose between economic security and their health. After today, New Jerseyans will no longer have to face such a choice. I am proud to sign into law one of the strongest earned leave protections in the country for every hardworking employee who deserves the basic right of a paid sick day.”

Who has to Comply?

The new law preempts all existing municipal and county sick leave laws. However, if an employer is already offering full paid leave that is accrued at a rate equal to or greater than that in the new policy, they will be in full compliance with the new law. Employers are permitted to create more generous policies that provide additional leave time.

Any exceptions?

  • Small businesses: Even small businesses must comply with the new legislation. There is no exception for small employers, regardless of number of workers employed. A motion was made by Assemblyman Robert Auth (R-Passaic) before the Assembly to exempt employers with less than 10 employees from the new legislation, but that motion was tabled.
  • Exempt workers: The new legislation does not cover per diem health care workers, construction workers covered by a collective bargaining agreement, or public employees who are already provided with sick leave with full pay.

When Will the Law Go into Effect?

The law will go into effect 180 days after it was signed by Governor Murphy, October 29, 2018.

If you have any questions about the new law, feel free to contact Jennifer Fischer (jfischer@kelleydrye.com) or Mark Konkel (mkonkel@kelleydyre.com).

“Times Up” for New York Employers – Governor Cuomo Signs Historic Anti-Harassment Legislation

On April 12, 2018, New York Governor Andrew Cuomo signed into law the New York State budget bill, which makes some big changes in the obligations of New York employers relative to sexual harassment.

The new law has both immediate and rolling implications for all New York employers.

EFFECTIVE IMMEDIATELY (I.E., RIGHT NOW)

The New York State Human Rights law now extends protections to certain non-employees, including contractors, subcontractors, vendors, consultants, and other persons providing services pursuant to a contract.

This means that employers may now be held liable for the sexual harassment of non-employees if the employer, its agents, or supervisors knew or should have known that the non-employee was subjected to sexual harassment and the employer failed to take appropriate corrective action.

This is a significant change in the law and employers should make sure that Human Resources and managers are aware of it. Continue Reading

EEOC’s New Guidance Takes Us Back to the Basics

Anti-harassment policies are nothing new and we would be shocked to find an employee handbook without one.

But, have they really worked?

In the #MeToo era, it has become clear that these policies have not really been effective and employers are facing increasing scrutiny over why they cannot prevent harassment, and how they handle claims of harassment once they are filed.

Layering onto this is recent federal and state legislation, which makes harassment more expensive and public — like the federal tax law that prohibits companies from deducting harassment settlements if the settlement is subject to a nondisclosure agreement, and New York State’s anti-harassment legislation which will prohibit mandatory arbitration of those claims.

These laws coupled with the increased scrutiny make it essential for employers of all sizes to take a hard look at their anti-harassment program, and determine whether it is doing its job — namely: preventing, disclosing, and dealing with bad behavior in the workplace, before that behavior becomes a lawsuit or explodes on the front page. Continue Reading

LGBTQ Rights Making News and Making Law In Recent Weeks

In the past two weeks, we saw two major decisions in the area of LGBTQ rights in the workplace.

First, the Second Circuit in New York held that Title VII does prohibit discrimination based on sexual orientation. Zarda v. Altitude Express, Inc., No. 15-3775, 2018 WL 1040820 (2d Cir. Feb. 26, 2018). In Zarda, the New York court overturned past precedent and held that the late Donald Zarda, a skydiving instructor who claimed that he was fired because he was gay, had a viable claim of gender discrimination under Title VII.

Second, the Sixth Circuit Court of Appeals reversed a district court’s decision on EEOC v. R.G. &. G.R. Harris Funeral, rejecting the notion that religious beliefs offer an excuse or reason to discriminate. This case took a sharp turn last week when the court held that the Harris Funeral Home had violated Title VII when it terminated Aimee Stephens, a transgender female employee, because she wanted to wear a skirt to work. No. 16-2424 (6th Cir. March 7, 2018). Ms. Stephens transitioned from male to female and the owner of the home (Thomas Rost) claimed that it violated his religious beliefs to allow plaintiff, a biological male, to wear a skirt to work. Ms. Stephens was ultimately fired over this issue. The District Court agreed with Mr. Rost citing the Religious Freedom Restoration Act (RFRA), which entered final judgment on all counts in the Funeral Home’s favor in August 2016.

On appeal, the Sixth Circuit found that Mr. Rost’s Christian beliefs did not override the employee’s right to express her gender. Thus, even considering the employer’s rights under the RFRA, Mr. Rost did not have the right to dictate his employee’s attire. In other words, Ms. Stephens had a right to wear a skirt to work and therefore, was unlawfully terminated. Continue Reading

Employer FMLA Tax Credit

As mentioned in our January 2018 Client Advisory, the Tax Cuts and Jobs Act (the “Act”), signed into law at the end of 2017, contains a temporary employer tax credit, ranging from 12.5 percent to 25 percent, that may be claimed by eligible employers for certain wages paid to qualifying employees during family and medical leave, pursuant to a written policy and subject to certain maximums and other limitations. This advisory explores some of the limitations of the new tax credit, highlighting issues employers should consider pending the issuance of additional guidance explaining and interpreting the Act’s provisions.

Eligibility Requirements. The tax credit is available to eligible employers regardless of whether they are covered by the Family and Medical Leave Act of 1993, as amended (“FMLA”), but to be eligible for the tax credit, employers’ policies must provide FMLA-like protections to their employees. That is, such employers must ensure that the employer will not interfere with the exercise of rights under the policy or discriminate against individuals opposing any practice prohibited by the policy. Furthermore, an employer must provide both full-time and part-time employees a minimum amount of annual paid family and medical leave at a rate not less than 50 percent of regular wages.

Worthwhile? In evaluating whether the potential tax credit is worth complying with the Act’s numerous requirements, employers should consider the costs and benefits of doing so. For example, for employers who pay 100 percent of regular wages during the leave, the credit is subject to a 25 percent cap; employers who pay 50 percent of regular wages are eligible for a 12.5 percent credit. The amount of credit allowed with respect to any employee is also subject to a cap based on such employee’s normal hourly wage rate for each hour of actual service performed for the employer and the number of hours for which family and medical leave is taken. In addition, the credit only applies to wages paid to employees who are employed for at least one year and who earn no more than 60 percent of the highly compensated employee limit for the preceding year (the limit is $120,000 for 2017 and 2018).

To read the full advisory, click here.

Add One Line in Your Employment Contracts and Policies to Reduce Exposure to Misclassification Liability

Employers, even with the most robust and well-intentioned human resources departments, can still face the dreaded misclassification lawsuit for their salaried employers. In many cases, exempt employees are properly classified as executive or administrative employees. A misclassification lawsuit, however, is difficult to dismiss early because plaintiffs are afforded great latitude in crafting factual disputes that can only be resolved at trial. On top of that, plaintiffs generally bring such claims as class or collective actions – making litigation costly as well. Further compounding the problem, settlement of wage and hour misclassification cases is the preferred mode of resolution – but only after a range of damages can be made with some degree of certainty.

What if I told you that if you included one simple sentence in your employment contracts, handbooks and policies for salaried employees, it would likely reduce your exposure by approximately two-thirds in FLSA cases? For starters, it would make it easier to settle at the right amount by avoiding unnecessarily inflated ceiling for damage calculations by plaintiffs. So what are the “magic words” in this simple sentence?

For exempt employees, your salary is intended to pay for all hours worked during each pay period, regardless of your scheduled or tracked hours. Continue Reading

The NLRB Joins the #MeToo Movement

As we previously posted, gender discrimination issues have been a hot topic at the National Labor Relations Board (“NLRB”). Now, it seems the NLRB is even more on board the #metoo movement – but with a twist, sexual harassment by unions. On February 20, 2018, the NLRB in ILA Local 28 (Ceres Gulf, Inc.) (NLRB 2018) issued a very concise, but biting decision that vacated an administrative trial court’s decision dismissing a breach of duty of fair representation case against a union for discriminating and sexually harassing a female union member. The NLRB’s rationale – the ALJ’s “credibility determinations about the [female employee’s] claim were based on sex stereotypes and demonstrated bias.” Wow. Mic drop.

In Ceres Gulf, the union operated an exclusive hiring hall which referred employees for work and training (for certification for certain jobs) based on seniority roster. The employee alleged that she made multiple requests for training and referrals. But, instead of granting her request, the union officer in charge of administering the seniority roster subjected the employee to groping and sexual propositions on at least 10 occasions. The ALJ rejected the employee’s version of the events because – wait for it:

It is simply implausible that [the employee who] appeared to be a tough woman who performs stevedoring work on the docks and previously drove a truck in Iraq, would have meekly allowed [the union officer] to harass and assault her a whopping 10 times, without an utterance. It is even less plausible that she would have tolerated such egregious misconduct to preserve a job that only paid her less than $10,000 annually. It is still less plausible that a woman, who was empowered by having two relatives holding influential union positions … would have allowed [the union officer] to repeatedly violate her. It is also implausible that, if [the union officer] withheld training because she rejected his advances from 2010 to 2015, as she alleges, he would have then enrolled her for training in June 2015 after her rejection. It is also implausible that [the employee], who claims that she was too embarrassed to complain about sexual harassment, would have not opted to address her training problems by solely complaining about [the union officer] other reportedly less embarrassing comments (e.g., his alleged comment that, as a driver, she did not require training, or that he did not want to train her to perform grimy jobs).

Whew. I quoted the entire section for full effect. It is important to note that this ALJ decision was issued in June 2017 – certainly, tone deaf in light of current climates.

While the ALJ’s decision was vacated, the NLRB took the extra step of ordering remand for a new trial but with a newly assigned judge. The NLRB went as far to explain that reassignment was necessary because “this an unusual case where the judge relied on inappropriate bases to assess credibility and intertwined those bases with other legitimate considerations”. In short, the NLRB just could not let the ALJ’s decision stand on the record without some formal rebuke.

On the one hand, this decision could be the result of an isolated situation where one ALJ stepped too far. On the other hand, this decision was issued five (5) days after the NLRB General Counsel, Peter Robb, issued the Google Advice Memo (discussed here) which justified the termination of an employee for crossing the line into sexual harassment while complaining about Google’s diversity practices. The close timing of the Google Memo and this decision is uncanny – raising some questions on the primacy of pro-union policy over other employment rights.

Key takeaways:

  1. Although no formal proposition of law was announced, the NLRB is undoubtedly adopting a very strong cultural position on gender stereotypes and evidentiary standards concerning sexual harassment. Notably, the primary targets in this decision are not the employer but the union through DFR charges and the NLRB’s administrative law judges. The union world (fairly or unfairly) is still largely male dominated. Women may now have an easier opportunity to raise claims against unions which has in large part been male dominated.
  2. In the same way that gender discrimination played into the DFR charge, the question is whether there will be more cases where gender discrimination and harassment will play a significant role in charges against employers. On a macro level, there is some debate as to whether (or the degree to which) activity under other employment statutes are appropriate for the NLRB’s jurisdiction. At the very least, employers can expect a much more gender-sensitive approach by the NRLB’s enforcement staff and administrative law judiciary.
  3. Last – is this a direct shot at unions and the institutional staff/judges at the NLRB? Some employers (fairly or unfairly) complain that unions and the NLRB staff maintain too cozy of a relationship. Pro-union advocates have quietly bemoaned the Google Memo’s legal framework because it utilizes the balancing test announced in the The Boeing Company (NLRB 2017) which rejected the union/employee friendly test in Lutheran Heritage (NLRB 2004). Many unions have a real vulnerability on gender and race discrimination issues. This is an issue that the NLRB can challenge unions while gaining public support for its efforts.

Is Misogyny Protected Activity? Part 2

Earlier, we blogged about James Damore, an engineer at Google who was terminated for his memo, which openly expressed his belief that women were not “biologically suited” for certain types of positions and criticism of the company’s efforts to diversify its work force.

The engineer challenged his termination by filing a charge with the National Labor Relations Board and launched a media offensive arguing that he was fired for his ‘conservative’ views.

I am pleased to report that the NLRB’s general counsel issued an advice memorandum affirming that Google was indeed acting lawfully when it terminated Mr. Damore. Among the conclusions, the NLRB General Counsel Jayme Sophir found that any employer must be given “particular deference” when it is acting to promote and comply with state and federal employment laws, and to promote diversity in their workplaces.  Thus, “employers must be permitted to ‘nip in the bud’ the kinds of employee conduct that could lead to a ‘hostile workplace’, rather than waiting until an actionable hostile workplace has been created before taking action.”

The general counsel also confirmed that the Board has already found that employee conduct, which “significantly disrupts work processes, creates a hostile work environment, or constitutes racial or sexual discrimination” is not protected.

Using that rationale, the Board concluded that Mr. Damore’s “use of stereotypes based on purported biological differences between women and men should not be treated differently than the types of conduct the Board found unprotected in these cases,“ as such comments “were likely to cause serious dissension and disruption in the workplace.”  Therefore, while “much of” the memorandum may have been protected, his statements about “biological differences  between the sexes were so harmful, discriminatory and disruptive as to be unprotected”.

The Board also noted that Google “carefully tailored” its message to explain Mr. Damore’s termination and to ensure employees were aware of their right to engage in protected speech.

The Takeaway for Employers – This decision confirms that, while it may be fine, there is a line which employees cannot cross when they are “protesting” employer actions with which they disagree. Employees may not engage in speech in the workplace (verbally, in written or electronic form), which is openly discriminatory, or which is likely to cause dissension or disruption in the workplace. This should be empowering to all employers. While employers certainly need to be careful when disciplining or discharging an employee under these circumstances, they do have the right to set some reasonable limits on what type of speech will be tolerated in the workplace.

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