IRS Releases Guidance on Employer FMLA Tax Credit

As mentioned in our January 2018 and March 2018 Client Advisories, the Tax Cuts and Jobs Act (the “Act”), provides a temporary corporate federal tax credit, ranging from 12.5 percent to 25 percent, that may be claimed by eligible employers for certain wages paid in 2018 and 2019 to qualifying employees during family and medical leave, pursuant to a written policy and subject to certain maximums and other limitations. The IRS recently released a set of Q&As in Notice 2018-71, that employers will find helpful in evaluating whether or not to claim the tax credit. This advisory summarizes some of the notable guidance provided.

The Notice provides much needed guidance on a number of issues related to how the requirements for the tax credit are satisfied. To be eligible for the tax credit, an employer must have in place a written policy that (i) provides at least two weeks of annual paid family and medical leave to all full-time “qualifying employees” and at least a proportionate (i.e., pro-rata) amount for part-time qualifying employees, (ii) requires a rate of payment that is at least 50 percent of the wages normally paid to such employee, and (iii) if applicable, includes language stating that the employer will in no way interfere with employees’ rights under the leave policy.

  • Written Policy. For 2018 (but not 2019), a written policy may be made retroactively effective to January 1, 2018 (or a later date), provided that it is adopted on or before December 31, 2018 and the employer makes any retroactive leave payments by the last day of the taxable year.
  • Family and Medical Leave. Only leave taken for Family Medical Leave Act (“FMLA”) purposes (such as for births, adoptions and family illnesses) may be eligible for the tax credit and the leave may only be used for these purposes.
  • Rate of Payment. Leave paid by a State or local government or paid leave required by State or local law is not taken into account in determining an employer’s rate of payment eligible for the credit. Conversely, if State or local law does not require the leave to be paid (i.e., leave can be provided as paid or unpaid), then such leave could be taken into account in determining an employer’s rate of payment.
  • Wages. For purposes of determining the wages normally paid to an employee, “wages” refers to amounts normally paid for services performed, excluding overtime (other than regularly-scheduled overtime) and discretionary bonuses. For employees who are paid (in whole or in part) on a basis other than a salaried or hourly rate, until further guidance is issued, an employer must determine wages normally paid to the employee using rules under the Fair Labor Standards Act for determining regular rate of pay.
  • Qualifying and Part-time Employees. The Notice provides guidance on identifying qualifying employees and determining part-time status. For example, for purposes of determining part-time status, the Notice provides that an employer may use any reasonable means to calculate hours of service until further guidance is issued.
  • Providing Different Benefits. Employers may design their policies to provide different benefits to different employee classifications, provided the minimum paid leave requirements are satisfied with respect to each FMLA purpose for which the employer intends to claim the credit. For example, a policy could provide for differences in the rate of pay or duration of paid leave based on the employee’s length of service.

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

2018 Qualified Retirement Plan Changes

As we approach the end of 2018, qualified retirement plan sponsors should consider reviewing the various changes brought on by recent legislation, regulations and agency guidance to determine whether any plan amendments or administrative updates are needed. This advisory provides a brief summary of some of the notable changes affecting qualified retirement plans.

Hardship Relief
As mentioned in our February 2018 client advisory, for plan years commencing after December 31, 2018, the Bipartisan Budget Act of 2018 (“Budget Act”) eases hardship withdrawal requirements by:

  • Not requiring a plan loan to be taken before a hardship withdrawal is made.
  • Allowing hardship withdrawals to include qualified matching contributions (“QMACs”), qualified non-elective contributions (“QNECs”), and earnings from all eligible sources.
  • Deleting the six-month suspension on deferrals following a hardship withdrawal.

Pursuant to recent IRS proposed regulations implementing the above legislative changes, plan sponsors may adopt any or all of the above changes for 2019. Plan amendments implementing the changes, however, need not be adopted until the end of the second calendar year that begins after the issuance of the IRS Required Amendment List that includes such changes. Employers seeking to put these hardship relief changes into effect for 2019 should, however, contact their third party administrators now to ensure appropriate administrative changes are in place for a January 1, 2019 effective date.

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

Illinois Requires Paid Break Time for Nursing Mothers

In August 2018, Illinois governor Bruce Rauner signed House Bill 1595 (“HB 1595”) amending the Illinois Nursing Mothers in the Workplace Act (the “Act”) to provide paid break time to nursing mothers “as needed” to express milk during work hours. The new requirement took effect immediately, and applies to all Illinois employers with more than five employees.

HB 1595 changes the Act in the following ways:

  • Nursing breaks “may” still run concurrently with other breaks. The prior version of the Act stated that the break time “must, if possible” run concurrently with any break time already provided.
  • Reasonable lactation breaks must be compensated. In light of the Act’s “as needed” language, and absent additional guidance from the State, employers should consider following the most expansive approach, i.e., granting nursing mothers paid break time when requested to express milk.
  • In addition, the amendment specifies that the reasonable, now paid, breaks requirement runs only “for one year after the child’s birth.”
  • Finally, the original Act excused employers from providing additional break time for nursing/expressing employees “if to do so would unduly disrupt the employer’s operation.” HB 1595 changed that affirmative defense language; now, in order to be excused from the additional paid breaks requirement, Illinois employers must establish “undue hardship,” a more demanding standard borrowed from the Americans with Disabilities Act and the Illinois Human Rights Act (“IHRA”). Under the IHRA, “undue hardship” is defined as an “action that is prohibitively expensive or disruptive” when considering its nature and cost, the overall financial resources of the facility, the overall financial resources of the employer, and the type of operation of the employer. The employer bears the burden of proving an undue hardship. Therefore, employers should take a considered approach when rejecting break time for expressing milk based on undue hardship to the employer.

Remember the Affordable Care Act (“ACA”) requires employers to provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.” See 29 U.S.C. 207(r).

Since the amendment is now in effect, Illinois employers should review their current nursing policy to ensure it complies with the recent amendment. If not, employers should revise it as soon as possible.

New York City Releases Clarification on Anti-Sexual Harassment Training Requirements

New York City employers were given some clarity this week regarding their obligations under the City’s Stop Sexual Harassment Act, as the New York City Commission on Human Rights released new FAQs about the law (found here). These FAQs touch on training and posting requirements that all employers should be aware of.

Training Requirements

The FAQs provide guidance on the types of employees and workers that employers must train. Specifically, the FAQs state that employers must train any employee who works 80 hours or more and works at least 90 days in a calendar year (so the training will cover a large number of part-time and short-term employees). Additionally, employers must also train independent contractors who meet these same working time requirements. However, employers will not have to train independent contractors who have received annual training elsewhere. Regardless, independent contractors will count toward the total number of employees for determining whether the employer has 15 employees, triggering the mandate to provide training.

Beginning in October 2019, New York employers will have to train all covered employees and independent contractors (who do not receive training elsewhere) once every calendar year. The City Commission explained that it is working with the New York State Division of Human Rights to release a training module that will meet the requirements of both the City law and the recently enacted State law. The employer will have to maintain proof of training documents for three years, including employee acknowledgments. Continue Reading

Questions Answered About New Jersey’s Paid Sick Leave Law

Effective October 29, 2018, the New Jersey Sick Leave Law requires employers to allow employees to accrue 1 hour of earned sick leave for every 30 hours work, up to 40 hours each year.  The law permits employers to create policies that provide additional leave time.  Here is a link to the law from the State of New Jersey Department of Labor and Workforce Development website.

Since we originally posted about the Paid Sick Leave Law, we’ve received a number of questions about how the Sick Leave Law will impact various employers.  Here are some FAQs that we’ve received.   Have a question that we didn’t cover?  Let us know. Continue Reading

It’s Officially Flu Season – Get Your Shot, Not Your Suit

This is not the first time you’ve heard from us about flu shots in the workplace (see our January 25, 2018 post). And here we are again. Each flu season, employers find themselves in the hot seat when well-intentioned attempts to implement a policy backfire. This year is no exception.

On September 28, the Equal Employment Opportunity Commission (the “EEOC”) filed suit in Tennessee federal court against a hospital alleging religious discrimination due to the hospital’s handling of a flu shot accommodation request. See Equal Employment Opportunity Commission v. Saint Thomas Health, 18-cv-00978.

The case is interesting because it involves a less traditional employment relationship (albeit one that is common to hospital employers). According to its website, the defendant, Saint Thomas Health, is a “family of Middle Tennessee hospitals and physician practices united by a single mission: to provide spiritually centered, holistic care that sustains and improves the health of the communities we serve.” It consists of nine hospital and is the “leading faith-based health care system in Tennessee and is a part of Ascension, the largest non-profit health system in the U.S. and the world’s largest Catholic health system.” Thus, the defendant employer in this litigation is, itself, a religious employer.

In this case, the employee at issue, Julian May, was an employee of TouchPoint Support Services, which provides food and environmental services at one of Saint Thomas’ hospitals. May began working at the Saint Thomas hospital in Murfreesboro in February 2012 as a floor tech. Even though May was an employee of TouchPoint, he was required to follow the policies of Saint Thomas.

And follow he did for the first few years of employment, until Saint Thomas changed its response. May, a member of the Moorish Science Temple of America, “believes his religion requires him not to take a flu shots [sic], but to rely on natural medicine.” As a result, and in response to Saint Thomas’ requirement that employees (including TouchPoint employees) receive an annual flu shot, May requested a religious accommodation, allowing May to wear a protective mask in place of the flu shot. In 2013 and 2014, Saint Thomas received, reviewed and approved May’s requests.

But, in November 2015 when May made this same request, Saint Thomas denied the request. Saint Thomas informed May that he needed to receive a flu shot and May, in turn, informed Saint Thomas that he could not due to his religion. Saint Thomas maintained that May could not return to work without receiving a flu shot. Thereafter, TouchPoint terminated May at the end of November 2015. This lawsuit followed with the EEOC claiming Saint Thomas violated federal law by failing to provide a religious accommodation to May.

In the press release, Delner Franklin-Thomas, director of the EEOC’s Memphis District Office, highlighted the mystery in this case noting, “[f]or several years, STH accommodated the employee’s religious belief. Then, STH refused to accommodate his religious belief.” He went on to state “[a]n employer should not force an employee to choose between employment and his religious belief unless doing so would cause an undue hardship to the employer.”

What Are the Take-Aways?

  • A change in course, such as Saint Thomas’ actions here, will not be viewed kindly by an agency or employee-side lawyer.
  • Even indirect employers can be responsible for flu shot policies run awry when those policies are enforced over the employees of a distinct company.
  • Religious employers are not exempt from religious discrimination claims.

In sum, this remains a tricky area – ripe for employer missteps. Employers (and their managers) should proceed carefully and consult legal counsel as needed.

EEOC Releases Preliminary Fiscal Year 2018 Statistics on Sexual Harassment Claims

Last week, the EEOC released preliminary data on sexual harassment claims for its 2018 fiscal year. The report (not surprisingly) shows an eye-popping rise in sexual harassment claims and enforcement activity – a trend acting EEOC chair Victoria Lipnic anticipates will continue for a while.

Even for employers not affected by New York and New York City’s sweeping sexual harassment prevention laws, or other new state or local laws, the EEOC report underscores the need for HR departments to shore up their discrimination and harassment prevention programs now.


Here is what the EEOC reports:

  • Sexual harassment charges with the EEOC increased by more than 12% from last year. This is the first time in a decade that the EEOC had an increase in annual sexual harassment complaints from the year prior.
  • Sexual harassment lawsuits filed by the EEOC’s attorneys – 41 in 2018 – increased by 50% from the previous year.
  • Reasonable cause findings in sexual harassment cases increased from 970 to nearly 1,200, an increase of over 23%.
  • Successful conciliation proceedings (a formalized mediation process run by the EEOC) jumped from 348 to nearly 500, a 43% increase.
  • Monetary awards recovered for the victims of sexual harassment rose to $70 million, an increase of over 22% from last year’s recovery.
  • The public’s interest in the EEOC’s sexual harassment enforcement efforts also appears to have increased: the EEOC reported that visits to its sexual harassment website page more than doubled compared to last year.

Continue Reading

Happy October! – A New Round of State Sexual Harassment Guidance And City Laws to Kick Off the Scariest Month of the Year

New York State and City have each passed new legislation addressing workplace sexual harassment and employer accommodations, which both have deadlines looming for New York employers.

Just in time – on October 1, the State DOL (finally) clarified – in a good way – a number of employer obligations under the State law. The State DOL also launched a website “Combating Sexual Harassment In the Workplace,” and an “Employer Toolkit,” with sample policies, complaint forms, and training materials. Easing sleepless nights for many employers, the DOL stated that training under the state law does not have to be completed until October 2019.

Because there can never be one without the other, effective October 15, 2018, the New York City Human Rights Law (“CHRL”) will now require covered employers to engage in or seek to engage in a “cooperative dialogue” with individuals who may be entitled to accommodations. This new law provides a separate cause of action against an employer for not engaging in a “cooperative dialogue” – but more on that later. Continue Reading

Healthcare Headache: New Jersey Healthcare Network a Target for EEOC Religion Claim

Recent filings show healthcare employers remain susceptible to religious discrimination claims.

In August, the EEOC filed suit against Hackensack Meridian Health (“Hackensack”), a New Jersey healthcare network, alleging an employee was harassed due to religion. According to the complaint, Hackensack hired Jojy Cheriyan in August 2015 to perform clinical informatics work. The EEOC alleges that his supervisor discovered that Mr. Cheriyan was Catholic, which sparked a strong negative reaction. According to the complaint, the supervisor “exhibited disapproval” when he observed a crucifix in Mr. Cheriyan’s office, and began treating Mr. Cheriyan in a hostile and verbally abusive manner, which included screaming at Mr. Cheriyan during meetings, belittling him and his work, tearing his work up and throwing objects at him.

The EEOC claims that Hackensack was aware of the harassment – due to Mr. Cheriyan’s complaints to management – yet failed to take reasonable corrective actions to put an end to the treatment.

At this time, the litigation is in its infancy with only the August complaint on the docket and an answer due in a few weeks. In its press release about the case, the EEOC’s New York District Director stated, “[p]eople of all religions are entitled to go to work and do their jobs without fear of harassment.” Continue Reading

Offering Student Loan Benefits Under 401(k) Plans

As employers look for creative ways to help employees manage their student loan debt, the IRS recently ruled that employer nonelective contributions to a 401(k) plan for employees who make student loan repayments would not violate the Internal Revenue Code’s contingent benefit rule. That rule prohibits an employer from making any benefit (other than matching contributions) contingent, directly or indirectly, on an employee’s making, or not making, elective deferrals under the 401(k) plan.

The guidance came in the form of a Private Letter Ruling (“PLR”), which may only be relied on by the employer who requested the ruling. Nonetheless, the PLR is instructive for other employers wishing to provide similar tax-favored benefits for employees who may not otherwise be in a position to contribute to their retirement savings.

In the PLR, the employer’s 401(k) plan provided a 5% match on eligible compensation for each pay period in which the employee made an elective deferral of at least 2% of eligible compensation. The employer proposed amending the plan to allow employees to opt out of the 5% match and, in lieu thereof, receive nonelective contributions to the plan equal to 5% of their eligible compensation for each pay period in which they make student loan repayments of at least 2% of their eligible compensation. Employees participating in the student loan repayment program would be eligible for a true-up matching contribution for any pay period in which they made elective deferrals to the plan but failed to make the 2% student loan repayment necessary to receive the nonelective contribution for such pay period. These nonelective and true-up matching contributions would be subject to the same vesting schedule as regular matching contributions and would be deposited in an employee’s account as soon as practicable after the end of the plan year if he/she were employed on the last day of the play year (except in the case of death or disability). The nonelective contributions would be subject to all plan qualification requirements and would not be treated as a match for 401(m) discrimination testing purposes (but any true-up matching contribution would be). All employees eligible to participate in the 401(k) plan would be eligible to participate in the program and could opt out prospectively at any time and resume eligibility for regular matching contributions. The employer represented that it had no intention of extending student loans to any employee eligible for the program.

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