Beginning on October 29, 2013, an amendment to New York State’s smoking law prohibits smoking anywhere on the grounds of a general hospital or residential health care facility.  The amendment also prohibits smoking in areas within 15 feet of any building entrance or exit, and within 15 feet of any entrance to or exit from the grounds of a general hospital or residential health care facility.  Although there is a narrow exception for patients of residential health care facilities and their visitors or guests, there is no exception for employees of general hospitals or residential health care facilities.  Therefore, general hospitals and residential health care facilities should take immediate steps to notify their employees of the new smoking restrictions and ensure that their employees comply with those restrictions effective October 29, 2013.

The amendment, signed into law by Governor Cuomo on July 31, 2013, modifies New York Public Health Law Section 1399-o, Subdivision 2, which governs smoking in outdoor areas.  As a result of the amendment, general hospitals and residential health care facilities must prohibit their employees from smoking on their grounds and within 15 feet of all entrances to or exits from their grounds.  However, depending on how the law is eventually interpreted, smoking might be permitted in employees' private vehicles parked on the grounds of general hospitals and residential health care facilities due to a “private automobile” exception in a pre-existing, unmodified provision of the smoking law.  The Department of Health has not yet issued guidance on this issue, or on the new law generally.

Prior to the amendment, the only outdoor areas subject to the law were certain outdoor areas of schools and railroad stations.  The smoking law’s restrictions on smoking in indoor areas (including indoor areas of general hospitals and residential health care facilities) are contained in a separate section and are not modified by the amendment.

As noted above, the law contains an exception for patients of residential health care facilities and their visitors or guests.  This narrow exception permits these individuals to smoke in a designated smoking area that is at least 30 feet away from any building structure (other than a non-residential structure wholly contained in the designated smoking area).  This exception does not apply to patients of general hospitals and their visitors or guests.

On August 27, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) announced final new regulations for Federal contractors for compliance under Section 503 of the Rehabilitation Act of 1973 ("Section 503") and the Vietnam Era Veterans' Readjustment Assistance Act ("VEVRAA").  The final rules will become effective 180 days after publication in the Federal Register.

For the first time, both rules require contractors to establish annual hiring benchmarks for qualified disabled individuals and protected veterans.  The OFCCP’s new Section 503 rule establishes a 7% utilization goal for individuals with disabilities for each of a contractor’s Job Groups, or for the entire workforce if the contractor employs 100 employees or less.  The new VEVRAA rule establishes a requirement for an annual benchmark for protected veterans, but allows contractors to choose one of two methods.  One option is to establish a benchmark equal to the national percentage (currently 8%), which will be published annually by the OFCCP.  Another option for contractors is to establish their own benchmark based on the best data available.

Highlights of the final rules that affect both Section 503 and VEVRAA include:

• Data Collection:  The requirement that contractors document and update annually the number of individuals with disabilities and protected veterans who apply for jobs, as well as the number who are hired.  The data must be maintained for three years.
• Invitation to Self Identify:  The requirement that contractors invite applicants to self-identify at both the pre-offer and post-offer stage.
• Incorporation of the EO Clause:  New specific language to be used in subcontracts.
• Records Access:  The requirement to allow OFCCP access to review documents related to a compliance check or focus review, either on-site or off-site.  In addition, contractors must, upon OFCCP’s request, inform OFCCP of all formats the records are maintained and provide them to OFCCP if requested.

On August 9, 2013, in Sutherland v. Ernst & Young LLP, the Second Circuit Court of Appeals ruled that the Fair Labor Standards Act (“FLSA”) does not prohibit the enforcement of a class action waiver in an arbitration agreement.  The Second Circuit determined that nothing in the FLSA could be construed to override the liberal policy favoring the enforceability of arbitration agreements established by the Federal Arbitration Act ("FAA").  The Second Circuit further held that a class action waiver in an arbitration agreement was not rendered invalid simply because that waiver removed the financial incentive for the employee to pursue a claim under the FLSA.

Stephanie Sutherland (“Sutherland”) sued her former employer, Ernst & Young LLP (“E&Y”), in a putative class action to recover overtime wages under the FLSA and the New York State Department of Labor’s Minimum Wage Order.  When Sutherland accepted her offer of employment with E&Y, she signed an offer letter and a confidentiality agreement, both of which provided that disputes between Sutherland and E&Y would be resolved in mandatory mediation and arbitration, pursuant to the terms of E&Y’s Common Ground Dispute Resolution Program (the “Arbitration Agreement”), a copy of which was attached to the offer letter and the confidentiality agreement.  Sutherland and E&Y agreed that the Arbitration Agreement barred both civil lawsuits and any class arbitration proceedings.

After Sutherland filed her putative class action in federal court, E&Y filed a motion to dismiss or stay the proceedings, and to compel arbitration on an individual basis.  The U.S. District Court for the Southern District of New York denied the motion, and E&Y appealed.  The Second Circuit reversed the District Court’s order.

The Second Circuit noted that the FAA establishes a liberal federal policy favoring arbitration and that federal courts should enforce arbitration agreements according to their terms unless there is a contrary congressional command overriding the FAA’s mandate in favor of arbitration.  The Second Circuit held that the FLSA contains no contrary congressional command against waiving class actions.  The court reasoned that since Section 16(b) of the FLSA requires an employee to affirmatively opt-in to any collective action brought under the statute, the employee surely also has the power to waive participation in class proceedings as well.  Notably, the Second Circuit expressly declined to follow the National Labor Relations Board’s decision in D. R. Horton, Inc., which held that a waiver of the right to pursue a claim under the FLSA collectively in any forum violates the National Labor Relations Act.

Sutherland asserted that the Second Circuit should invalidate the class action waiver in the arbitration agreement because the waiver prevented her from effectively vindicating her statutory claims, and thus operated as a prospective waiver of her "right to pursue” statutory remedies.  She argued that she could not effectively vindicate her FLSA claims because she had no financial incentive to pursue those claims on an individual basis.  She claimed that she would be forced to expend approximately $200,000 in an individual action to recover less than $2,000 in damages.  The District Court had been persuaded by this argument, relying on the Second Circuit’s 2009 decision in In re: American Express Merchants’ Litigation.

After the District Court’s ruling, however, the Supreme Court reversed the Second Circuit’s decision in American Express.  The Supreme Court held that the plaintiffs in that case could not justify the invalidation of a class action waiver under the “effective vindication doctrine” by showing that they had no economic incentive to pursue their antitrust claims individually in arbitration.  The Supreme Court noted that the mere fact that it was not worth the expense to prove a statutory remedy did not constitute an elimination of the right to pursue that remedy.  Accordingly, the Second Circuit concluded that its 2009 American Express decision, upon which the District Court relied, was no longer good law.

With this decision, the Second Circuit has joined the trend among the federal circuit courts to enforce class action waivers in FLSA lawsuits.  Given the high cost of litigating wage and hour class actions, arbitration agreements containing class action waivers can be a useful tool for some employers.  Employers should carefully evaluate whether it would be worthwhile to enter into arbitration agreements with employees and whether to include a class action waiver in such arbitration agreements.

The U.S. Supreme Court recently issued a 5-4 decision that sets the standard for how retaliation claims under Title VII of the Civil Rights Act ("Title VII") will be analyzed.  In University of Texas Southwestern Medical Center v. Nassar, the Court held that a plaintiff alleging a retaliation claim under Title VII must establish that retaliation for his or her protected activity was the "but-for" cause of the adverse employment action taken by the employer, rather than just "a motivating factor" for the adverse employment action.  This holding will likely make it more difficult for plaintiffs to prevail in Title VII retaliation claims and may even reduce the number of frivolous Title VII retaliation lawsuits.

The plaintiff in the Nassar case was a former faculty member of the University of Texas Southwestern Medical Center (the "University") and a staff physician at a University-affiliated hospital, Parkland Memorial Hospital (the "Hospital").  During his employment with the University, the plaintiff made complaints to the University's Chair of Internal Medicine that his supervisor (the Chief of Infectious Disease Medicine) was biased against him due to his religion and Middle Eastern national origin.  Although his supervisor assisted him in obtaining a promotion in 2006, the plaintiff continued to believe that she was biased against him.  The plaintiff resigned from his faculty member position with the University in July 2006, with the hope of continuing his employment as a staff physician at the Hospital.  Upon resigning from his position with the University, the plaintiff wrote a letter to the Chair of Internal Medicine and other individuals at the University alleging that he was resigning because his supervisor had harassed him due to his race, religion, and national origin.

Although the Hospital had initially offered the plaintiff the opportunity to continue his employment as a staff physician despite his resignation from the University, the University's Chair of Internal Medicine protested to the Hospital (after receiving the plaintiff's resignation letter) that the job offer was inconsistent with the affiliation agreement between the University and the Hospital, which required that Hospital staff physicians also be members of the University faculty.  The Hospital then withdrew its offer.

The plaintiff filed discrimination and retaliation claims under Title VII against the University.  The jury found in favor of the plaintiff on both claims.  The Fifth Circuit Court of Appeals vacated the jury's verdict in favor of the plaintiff on his discrimination claim, holding that the plaintiff had submitted insufficient evidence in support of that claim.  However, the Fifth Circuit affirmed the jury's verdict on the plaintiff's retaliation claim, holding that such a claim required only a showing that retaliation was "a motivating factor" for the adverse employment action.

In reviewing and vacating the Fifth Circuit's decision on the plaintiff's retaliation claim, the Supreme Court examined the language of the retaliation provisions of Title VII, and concluded that the statute requires proof that retaliation is the "but-for" cause of the adverse employment action, rather than simply "a motivating factor" for the adverse employment action.  The Court noted that Title VII's status-based discrimination provision was expressly amended in 1991 to provide that "race, color, religion, sex, or national origin" need only be "a motivating factor" for an employment practice in order to establish that the employment practice is unlawful, but Title VII's retaliation provision was not similarly amended.  Title VII's retaliation provision provides that:

It shall be an unlawful employment practice for an employer to discriminate against any of his employees . . . because he has opposed any practice made an unlawful employment practice . . ., or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing . . . .

The Court found that the word "because" means that a plaintiff must establish that retaliation is the "but-for" cause of the adverse employment action.  The Court relied on its decision in Gross v. FBL Financial Services, Inc., in which it interpreted similar language in the Age Discrimination in Employment Act ("ADEA") and concluded that a plaintiff asserting an ADEA claim must establish that age is the "but-for" cause of the adverse employment action.

The Court noted in its decision that "claims of retaliation are being made with ever-increasing frequency" and that "the number of retaliation claims filed with the EEOC has now outstripped those for every type of status-based discrimination except race."  The Court expressed its reluctance to lessen the causation standard for retaliation claims, stating that this could "contribute to the filing of frivolous claims."

This decision will likely make it easier for employers to defend themselves against Title VII retaliation claims, and may even reduce the number of frivolous retaliation claims filed by employees under Title VII.  It remains to be seen, however, whether there will be legislative efforts to amend Title VII in order to lessen the proof of causation necessary to establish a retaliation claim.

The Second Circuit Court of Appeals recently ruled that the Chairman and CEO of a corporate supermarket chain – Gristede’s Foods, Inc. (“Gristede’s”) – could be held personally liable for damages arising from Fair Labor Standards Act (“FLSA”) claims brought by employees of the supermarkets.  Specifically, the Second Circuit ruled that the Chairman and CEO – John Catsimatidis – was an “employer” within the meaning of the FLSA, and could therefore be held jointly and severally liable along with Gristede’s for such damages.

At the time of the case, Gristede’s operated between thirty and thirty-five supermarket stores in the New York City area, and employed approximately 1,700 workers.  In 2004, a group of Gristede’s employees filed a class/collective action lawsuit for unpaid overtime under the FLSA and New York Labor Law (“NYLL”).  The employees prevailed on their claims filed in federal district court, and the parties subsequently entered into a settlement agreement.  However, Gristede’s defaulted on its payment obligations under the agreement, and the plaintiff employees then moved to hold Catsimatidis personally liable for the FLSA damages in question.  The federal district court granted the motion, finding Catsimatidis could be held personally liable, which then prompted an appeal to the Second Circuit.

The Second Circuit affirmed the district court’s decision, holding that, in certain circumstances, an individual may be considered an “employer” under the FLSA and, consequently, held personally liable for violations of the statute.  Further, the court found those circumstances existed with respect to Catsimatidis because, among other things:  (a) he “was active in running Gristede’s, including contact with individual stores, employees, vendors, and customers”; (b) he was ultimately responsible for the employees’ wages and signed their paychecks; and (c) he supervised other managerial personnel, such as the CFO and COO of Gristede’s.

As one might expect in a large corporation employing nearly 2,000 workers, Catsimatidis maintained oversight of Gristede’s business at a high level and was not typically involved in day-to-day operations at the supermarkets.  For example, Catsimatidis did not hire or fire rank-in-file employees, did not fix their specific wages or schedules, and had only limited interaction with his subordinate mangers who handled such matters.  Nevertheless, Catsimatidis’s limited, high level activity was sufficient to find him liable.  The court also alluded that Catsimatidis’s unexercised authority, as Chairman and CEO, to decide these types of issues may also be an “important and telling factor” in whether he could be held personally liable as an “employer” under the FLSA.

Further, the Second Circuit found that it was irrelevant that Catsimatidis was not alleged to have been personally complicit in the FLSA violations at issue and that the FLSA would carry an “empty guarantee” to remediate employees for violations if it did not hold an employer’s controlling individuals accountable to the law.  Notably, the Second Circuit did not decide whether Catsimatidis could also be held personally liable under the NYLL, and instead remanded the case to the original federal district court to decide that issue.

Startling in its potential implications, the Second Circuit’s decision emphasizes the importance of maintaining compliance with the FLSA’s minimum wage and overtime requirements and the risks associated with violations of the statute.

The New York Court of Appeals, in Barenboim v. Starbucks Corp., recently clarified the types of employees who may participate in tip-pooling arrangements and the extent to which employers may exclude otherwise tip-eligible employees from participating in a tip pool under the New York Labor Law.

Background

Under Starbucks’ tip policy, baristas and shift supervisors share tips collected each week.  Two separate lawsuits were filed in federal court against Starbucks, challenging the policy as it applied to certain categories of employees.  In one case, baristas, who take and deliver orders, stock product, and clean tables, alleged that shift managers could not lawfully participate in the tip pool because their supervisory duties rendered them ineligible for tips.  In the other case, a group of assistant managers argued that because they perform some customer service-related duties and lack “full” managerial authority, Starbucks improperly excluded them from the tip pool.  The U.S. District Court for the Southern District of New York ruled in favor of Starbucks in both cases, and the plaintiffs in both cases appealed.

Noting that the cases raised novel questions of state law, the U.S. Court of Appeals for the Second Circuit certified two questions to the New York Court of Appeals, the state’s highest court:

1. What factors determine whether an employee is an “agent” of his employer for purposes of N.Y. Labor Law Section 196-d and, thus, ineligible to receive distributions from an employer-mandated tip pool?
2. Does New York Labor Law permit an employer to exclude an otherwise eligible tip-earning employee under Section 196-d from receiving distributions from an employer-mandated tip pool?

The Court's Analysis of the Issues

Citing the New York State Department of Labor’s January 2011 Hospitality Industry Wage Order, the Court held that employees are tip-eligible even if they have managerial responsibility as long as they provide personal service to customers as a principal part of their jobs, rather than just on an occasional or incidental basis.  However, an employee who has “meaningful authority” or control over subordinates is ineligible to participate in a tip pool.

The Court explained that “meaningful authority might include the ability to discipline subordinates, assist in performance evaluations or participate in the process of hiring or terminating employees, as well as having input in the creation of employee work schedules, thereby directly influencing the number and timing of hours worked by staff as well as their compensation.”  The Court left it to the Second Circuit Court of Appeals to apply those principles to the specific facts of the baristas’ case.

With respect to the second issue, the Court concluded that Section 196-d of the New York Labor Law does not create an affirmative right for all tip-eligible employees to participate in tip-sharing arrangements.  Although the Court stated that “there may be an outer limit to an employer’s ability to excise certain classifications of employees from a tip pool,” the Court found no evidence to suggest that Starbucks’ policy, as applied to assistant managers, reached that limit.

Impact on Employers

The Court’s decision provides some clarity regarding employees’ eligibility to participate in tip pools.  However, because the Court did not apply the “meaningful authority” standard to the facts of the baristas’ case, the analysis remains somewhat unclear.  Additionally, the Court did not identify which exclusions of tip-eligible employees might be considered unlawful.  Accordingly, employers should consult with counsel before implementing tip-sharing arrangements.

On July 17, 2013, the Fourth Circuit Court of Appeals held, in a 2-1 decision, that President Obama's January 4, 2012 recess appointments to the National Labor Relations Board ("NLRB") were unconstitutional because the Senate was not in "recess" at the time of the appointments.  The Fourth Circuit is the third federal appellate court to weigh in on this issue, joining the D.C. Circuit (which also held that the January 4, 2012 recess appointments were unconstitutional) and the Third Circuit (which held that Craig Becker's March 27, 2010 recess appointment was unconstitutional).

In the two consolidated cases before the Fourth Circuit, the majority followed the logic of the D.C. Circuit and the Third Circuit, and determined that the President is only authorized to make recess appointments without confirmation by the Senate during recesses that occur between sessions of the Senate rather than breaks in activity that occur while the Senate is in session.  This issue will ultimately be decided by the Supreme Court, which has agreed to consider the NLRB's appeal from the D.C. Circuit's Noel Canning decision.

The New York City Council passed the Earned Sick Time Act on June 27, 2013, overriding Mayor Bloomberg's veto.  Under the Act, private sector employers with 20 or more employees within New York City will be required to offer at least 40 hours of paid sick leave per year to each employee beginning on April 1, 2014.  Private sector employers with less than 20 employees within New York City will be required to offer at least 40 hours of unpaid sick leave per year to each employee beginning on April 1, 2014.  Beginning on October 1, 2015, private sector employers with 15 or more employees within New York City will be required to offer at least 40 hours of paid sick leave per year to each employee, and private sector employers with less than 15 employees within New York City will continue to be required to offer at least 40 hours of unpaid sick leave per year to each employee.  These implementation dates could be postponed if economic indicators based on a financial index maintained by the Federal Reserve Bank of New York do not meet certain conditions.  The Act does not cover independent contractors, work study students, public sector employees, and certain types of hourly professional employees.

The Act provides that an eligible employee will earn at least one hour of sick leave for every 30 hours worked.  However, employers are not required to permit employees to use accrued sick leave until 120 calendar days after the commencement of employment.  Part-time employees are also covered by the Act, and will earn sick leave at the same rate.  Employers may provide employees with a faster accrual of sick leave than what is required by the Act, and may permit employees to use sick leave within their first 120 calendar days of employment.

Under the Act, accrued sick leave may be used for absences due to:  (1) the employee's own health condition; (2) the employee's need to care for a spouse, domestic partner, child, parent, or the child or parent of a spouse or domestic partner; or (3) the closure of the employee's place of business due to a public health emergency or the employee's need to care for a child whose school or child care provider has been closed due to a public health emergency.  An employer may require documentation that sick leave was used for one of these purposes only if the absence is for more than three consecutive work days.  The Act prohibits employers from retaliating against employees for their use of sick leave or for filing a complaint alleging a violation of the Act.

The number of employees that an employer has is determined by counting all compensated workers during a given week, including full-time, part-time, and per diem employees.  If the number of employees fluctuates, the size of the employer may be determined for the current calendar year based upon the average number of employees who worked for compensation per week during the preceding calendar year.  In chain businesses, the total number of employees in the group of establishments must be counted.

Employers may require reasonable notice from an employee who intends to use sick leave.  If the sick leave is foreseeable, the employer may require up to seven days' notice.  If the sick leave is not foreseeable, an employer may only require notice as soon as practicable.

If an employee is transferred from one location to another location within New York City, but continues to be employed by the same employer, the employee is entitled to keep his or her accrued sick leave.  However, an employer is not required to provide financial or other reimbursement to an employee upon termination, resignation, retirement, or other separation, whether voluntary or involuntary, for accrued unused sick leave.

The Act does not apply to any employee covered by a valid collective bargaining agreement, as long as the provisions of the Act are expressly waived in the collective bargaining agreement and the agreement provides for a comparable benefit to covered employees in the form of paid days off.  For employees in the construction or grocery industry who are covered by a valid collective bargaining agreement, there is no requirement that the agreement provide for a comparable benefit to covered employees in order for such employees to be exempt from the provisions of the Act -- it is sufficient that the collective bargaining agreement expressly waive the provisions of the Act, regardless of whether a comparable benefit is provided.

On June 26, 2013, the United States Supreme Court issued its highly anticipated decision in United States v. Windsor.  The Court ruled that a portion of the Defense of Marriage Act (“DOMA”) is unconstitutional.  DOMA, which was enacted in 1996, restricted the definitions of the terms “marriage” and “spouse” for purposes of any federal law to include only opposite-sex marriages.  The effect of this provision was to deny recognition of same-sex marriages for purposes of all federal laws, including the laws governing taxation and employee benefits.  As a result, same-sex couples married in a jurisdiction permitting same-sex marriage, while treated as legally married for state law purposes, were not treated as married under any federal law.

In a 5-4 decision, the Supreme Court in Windsor found that this provision of DOMA is “unconstitutional as a deprivation of the liberty of the person protected by the Fifth Amendment of the Constitution.”  In explaining its decision, Justice Kennedy, writing for the majority, stated that:

DOMA instructs all federal officials, and indeed all persons with whom same-sex couples interact, including their own children, that their marriage is less worthy than the marriages of others.  The federal statute is invalid, for no legitimate purpose overcomes the purpose and effect to disparage and to injure those whom the State [New York], by its marriage laws, sought to protect in personhood and dignity.  By seeking to displace this protection and treating those persons as living in marriages less respected than others, the federal statute is in violation of the Fifth Amendment.

As a result of the decision in Windsor, the federal government will now recognize same-sex marriages in those states where same-sex marriages are permitted.  Same-sex marriage is permitted in the following jurisdictions:  California (effective June 28, 2013, as a result of the Supreme Court’s Proposition 8 decision in Hollingsworth v. Perry); Connecticut; Delaware (effective July 1, 2013); Iowa; Maine; Maryland; Massachusetts; Minnesota (effective August 1, 2013); New Hampshire; New York; Rhode Island (effective August 1, 2013); Vermont; Washington; and Washington, D.C.  Therefore, at least for same-sex couples legally married and residing in one these jurisdictions, their marriages will now be recognized as legal marriages for the purposes of all federal laws.

Federal recognition of same-sex marriages will have a significant impact on employee benefit plans and arrangements.  As a result of the decision in Windsor, for purposes of employee benefit plans and arrangements governed by the Internal Revenue Code (“Code”) and the Employee Retirement Income Security Act (“ERISA”), a spouse will include a same-sex spouse, at least with respect to those jurisdictions within which same-sex marriage is legal.

Summarized below are the principal effects of the decision on common employee benefit plans and arrangements for legally married same-sex spouses:

1. Health Benefits – The value of health coverage (including dental and vision) for a same-sex spouse no longer will be imputed in the employee’s taxable income.  In addition, any employee premium contributions in connection with coverage for a same-sex spouse may now be made on a pre-tax basis pursuant to a Code Section 125 cafeteria plan.
2. Health FSAs, HRAs and HSAs – Employees may use amounts available under a health flexible spending account, a health reimbursement account or a health savings account to reimburse the medical expenses of a same-sex spouse.
3. Cafeteria Plan Change of Status Rules – Generally, an employee may only change a cafeteria plan election mid-year (i.e., outside of an open enrollment period), if a “change of status” event has occurred.  A change of status for a same-sex spouse will now be considered a change of status under the cafeteria plan rules.
4. COBRA/Special Enrollment Rules – A same sex spouse will be treated as a qualified beneficiary under the federal COBRA continuation coverage rules.  The HIPAA special enrollment rules also will apply with respect to same-sex spouses.
5. FMLA – Covered employers must now provide leave to eligible employees to care for an FMLA-qualifying condition of a same-sex spouse, if the covered employee resides in a state where same-sex marriage is legally recognized.
6. Retirement Plans – A same-sex spouse will be treated as a spouse for purposes of retirement plans governed by ERISA and the Code, including 401(k) plans, 403(b) plans, defined benefit plans, and 457(b) plans.  As a result, a same-sex spouse generally will have the same spousal rights as an opposite-sex spouse.  For example:

• A same-sex spouse will be the beneficiary of the employee participant, unless the spouse consents to the designation of a different beneficiary.  Further IRS guidance will be required regarding the continued validity of prior beneficiary designations that likely were made without a requirement that the consent of a same-sex spouse be obtained.
• Benefits paid under certain types of plans (defined benefit plans, money purchase pension plans and other defined contribution plans providing for annuity forms of payment) generally must be paid in the form of a 50% joint and survivor annuity with the same-sex spouse as the co-annuitant, unless the spouse consents to a different form of payment.
• A same-sex spouse will be allowed to roll over an eligible distribution from a plan to an IRA or other retirement plan.
• A same-sex spouse will be treated as a spouse for purposes of the qualified domestic relations order rules.
• Hardship distributions under certain types of plans (generally, defined contribution plans that permit such distributions) will be available to pay for medical care, tuition and burial expenses with respect to a same-sex spouse.

7. Other Fringe Benefits – With respect to other benefit arrangements governed by the Code, benefits provided to a same-sex spouse generally should be treated for tax purposes in the same manner as benefits provided to an opposite-sex spouse.

Many plans were drafted to specifically incorporate the DOMA definition of spouse to avoid any confusion regarding the treatment of same-sex spouses under the terms of the plan.  Therefore, plan documents will need to be reviewed to determine if the DOMA definition of spouse is reflected.  If it is, an amendment to the plan may be required.  With respect to qualified retirement plans, any required amendment generally will need to be adopted by the last day of the current plan year, unless the IRS provides for a delayed amendment due date.

At present, it is unclear how couples who were legally married in a jurisdiction recognizing same-sex marriage, but who are residing in a jurisdiction that does not recognize the validity of the marriage, will be treated under federal law.  For example, if an employee was legally married to a same-sex spouse in New York, but is residing in Pennsylvania (where same-sex marriages are not recognized), it is unclear if that employee would be considered to be legally married under federal law.  Further guidance on this issue will be required.  Finally, the Windsor decision has no impact on unmarried same-sex domestic partners.

The IRS has indicated that it will be moving swiftly to provide guidance on the impact of the Windsor decision.  Therefore, we anticipate that the IRS and other federal agencies will be issuing guidance on many of the issues noted above in the near future.

There are mirages in the labor relations and employment desert.  Concepts and principles that, for a moment, you see and understand, but moments later you have confused or misapplied.  The “fluctuating work week” method of calculating overtime is one of those employment law mirages.  At first glance, it appears as an oasis for employers in the FLSA desert – then, like a mirage, disappears when carefully scrutinized and correctly applied.

The “fluctuating work week” (FWW) method of calculating overtime is an alternative to the familiar “time and one-half” method for paying non-exempt employees who actually work more than 40 hours in a workweek.  It was first recognized more than 70 years ago by the United States Supreme Court in Overnight Motor Transport Co. v. Missel, and was later codified in the federal wage and hour regulations at 29 C.F.R. §778.114.

Often referred to as the “half-time” measure of overtime, it applies:  (1) if there is a mutual understanding between an employer and a non-exempt employee that the employee will be paid a fixed weekly salary no matter how many hours that employee works in a week; (2) if the fixed salary is sufficiently large so that the employee’s regular rate of pay never drops below the minimum wage (federal or state); (3) if the employee’s work week fluctuates both over and under 40 hours per week; and (4) if the employee is paid a “half-time” overtime premium for hours worked beyond 40 in a week.  Using the “half-time” method, the employee’s overtime rate is one-half of the rate determined by dividing the employee’s weekly salary by the number of hours that the employee actually works in a week.  In other words, the overtime rate paid for hours worked in excess of 40 in a week declines the more hours that an employee works.

Not surprisingly, employees are not quick to embrace this system, and employers must consider the “labor relations” and “employee morale” implications of using the FWW method, even in those limited circumstances where it can be lawfully applied.  Employers who do use the FWW method are subject to legal challenges on many fronts.  For example, the USDOL takes the position that the FWW method may only be applied to employees whose weekly hours do not customarily follow a regular schedule and fluctuate both above and below 40 hours per week.  In other words, there must be evidence that the employee’s hours regularly dip below 40 in a week without any diminution in that employee’s fixed salary.  Second, the USDOL insists that the employee be paid a fixed salary – obviously without deductions or offsets, but also without non-discretionary enhancements such as commissions or bonuses.  Note, this “fixed salary” requirement is more stringent than the “salaried basis” test applicable to the “white collar” overtime exemptions.  In 2011, the USDOL considered, but ultimately rejected, proposed amendments to its regulations that would have allowed employers to use the FWW method even if the employer paid employees non-discretionary earned bonuses in addition to the required “fixed salary."  Clearly, the USDOL is not a fan.

Further complicating the use of the FWW method for New York employers is the open question whether this method also applies to overtime payments under New York law.  Several decisions (and an older NYSDOL opinion letter) have suggested that the federal methodology for computing overtime is permissible, but there is no clear precedent on this issue.  Employers should carefully consider whether to use the FWW method to compute overtime, and those who do should regularly review those arrangements to insure that they continue to meet the applicable standards (fluctuating work week, fixed salary, regular rate above the minimum wage, etc.).  Be careful or this FLSA “oasis” may turn out to be a “mirage” that will only produce unhappy employees and costly litigation.

The Treasury Department has announced that the implementation date for the employer mandate provisions of the Patient Protection and Affordable Care Act (“ACA”) (i.e., the provisions requiring employers with 50 or more full-time employees to provide affordable, minimum value health coverage to full-time employees or pay a penalty to the federal government) has been delayed until January 1, 2015.  The employer mandate provisions had been scheduled to take effect on January 1, 2014.  In its announcement, the Treasury Department indicated that the delay was in response to concerns regarding the complexity of the rules and the administrative challenges posed by the reporting requirements.  The Treasury Department stated that the delay would afford the administration additional time to issue simplified reporting rules and give employers time to adapt their health coverage and reporting systems to conform to the rules.

As a result of the implementation delay, employers will not be subject to any penalties for the failure to provide affordable, minimum value coverage to their full-time employees for 2014.  However, the delay applies only to the employer mandate portion of ACA.  Other ACA changes scheduled to be fully effective in 2014 (including the individual mandate, the required employer-provided notice regarding the availability of exchange coverage, the 90-day waiting period rules, the prohibition on pre-existing condition limitations for all individuals, the out-of-pocket and cost-sharing limitations, and the prohibition on any annual and lifetime benefit limits) will take effect without delay, unless the agencies provide further relief.

While some employers might consider taking a “breather” from some of their ACA compliance efforts, the delay isn’t broad enough to ignore ACA altogether until 2014.  Indeed, some employers should view the delay as a renewed opportunity to do some compliance planning, without the pressure of a looming effective date.

The Treasury Department has indicated that formal guidance regarding the delayed employer mandate implementation date will be issued soon.

The Occupational Safety and Health Administration ("OSHA") issued a new policy in April of 2013 focused on protecting temporary workers.  In a memorandum that was issued to all OSHA Regional Directors, the agency explained that the policy was needed because there were several 2013 workplace fatalities involving temporary workers who had not received adequate training.  Going forward, all OSHA investigators have been instructed that they need to “determine within the scope of their inspections whether any employees are temporary workers and whether any of the identified temporary employees are exposed to a violative condition.”

OSHA’s new policy does not appear to be a dramatic or drastic change in the agency’s direction at this time.  Employers who employ temporary workers through staffing agencies have always had -- and will continue to have -- an obligation to ensure that those workers are correctly trained and protected from workplace hazards (e.g., personal protective equipment, lockout/tagout, and HazCom, to name just a few).  Similarly, staffing agencies who have absolutely no supervisory role over employees or any control over the workplace at issue would not appear to be subject to citations under OSHA’s multi-employer worksite doctrine.  However, OSHA’s initiative seemingly includes a desire to place an affirmative “due diligence” obligation on staffing agencies to know what tasks their employees will be performing after being assigned to an employer and/or what safety hazards they might be exposed to.  At this point, OSHA has not explained exactly what such a “due diligence” obligation might include.

If and when the agency provides additional guidance, we will report it on this blog.