Miriam Regalado and her fiancée Eric Thompson worked for North American Stainless (NAS). Regalado filed a sex discrimination charge against NAS with the EEOC. Three weeks later, NAS fired Thompson. Those were the facts presented to the United States Supreme Court when it unanimously decided on January 24, that Thompson could bring a Title VII retaliation claim against NAS even though Thompson never engaged in Title VII protected activity. The Supreme Court’s holding in the case, Thompson v. North American Stainless, LP, effectively broadens the scope of Title VII’s anti-retaliation provisions to protect individuals who have a significant association with or relation to employees who have engaged in protected conduct.

Of course, Title VII makes it illegal for an employer to “discriminate” against an employee who files a charge with the EEOC. But Thompson never filed a charge, Regalado did. The Court surmounted this difficulty by finding that Title VII’s anti-retaliation provision should be construed to prohibit a broad range of employer conduct – a range of conduct much broader than actions which affect the terms and conditions of employment of the employee who filed the charge. Quoting from its decision in Burlington N. & S.F.R. Co. v. White, 548 U.S. 53 (2006), the Court reiterated that “discrimination” under the anti-retaliation provision includes any employer action that “well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” The Court then concluded logically that “a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancée would be fired.” The Court acknowledged that its decision might create difficulty in determining precisely which types of relationships will be sufficient to conclude that retaliation against the third party would dissuade the individual who engaged in protected activity, but declined to provided a bright line rule. It stated that firing a close family member will “almost always” meet the standard, and retaliating against a “mere acquaintance” will almost never meet it, but declined to provide further guidance.
 

Finding that the firing of Thompson could be illegal retaliation against Regalado, did not, however, end the inquiry. After all, it was Thompson, not Regalado, who sued for retaliation. To answer the question of whether Thompson could bring a claim against NAS, the Court had to determine what the term “person aggrieved” means in the Title VII provision which permits a “person aggrieved” to bring an action in court. In deciding that question, the Court rejected NAS’s argument that it means the employee who was retaliated against. Instead, the Court concluded that the term means anyone with an interest which Title VII arguably seeks to protect. Thompson fell within this zone of interests because Title VII is designed to “protect employees from their employers’ unlawful actions.” Because, assuming NAS’s motive was retaliatory, NAS tried to punish Regalado by harming Thompson, Thompson was within the Title VII zone of interests. So even though it was Regalado, not Thompson, who suffered illegal retaliation when Thompson was fired, Thompson was still a “person aggrieved” who was allowed to sue. It thus appears that the zone of interests test can be satisfied any time the employer’s action against a third party constitutes prohibited retaliation, thereby allowing the third party to bring a claim.

The significance of the Court’s decision is obvious: the holding invites more retaliation claims by persons “associated with” an employee who has engaged in Title VII protected activity. Essentially, the Court has created a new protected classification, the definition of which is unclear. As a result, an employer must now carefully consider the potential for a retaliation claim any time it takes any adverse employment action against someone, particularly family members, “associated with” an employee who has engaged in protected activity.
 

We have previously posted on the early retirement incentive for employees represented by collective bargaining units affiliated with the New York State United Teachers (“NYSUT”) who belong to either the New York State Employee Retirement System or the New York State Teachers Retirement System (“TRS”), are at least 55 years of age, and have attained at least 25 years of creditable service (“55/25 Legislation”). The 55/25 legislation allows eligible employees to retire without the reduction in retirement benefits that would normally apply to retirement system members who are on Tiers 2, 3, or 4 who do not have 30 years of service.  The legislation recently survived another court challenge to its constitutionality.

Two days after the 55/25 Legislation was signed into law, the Empire State Supervisors and Administrators Association (“ESSAA”), a union that represents primarily administrators and supervisors in public school districts, and one of its local unions, challenged the 55/25 Legislation in court. The ESSAA contended that the statute violates its members’ rights to equal protection and freedom of association under the United States and New York State Constitutions, by limiting eligibility only to individuals who are employed in positions represented by collective bargaining units affiliated with NYSUT.
 

The trial court found the legislation constitutional, and the ESSAA appealed to the Appellate Division, Third Department. On January 20, 2011, the Appellate Division unanimously affirmed the trial court’s decision. The Appellate Division held that a rational basis exists for distinguishing between employees in NYSUT-affiliated bargaining units and employees not in NYSUT-affiliated bargaining units. Specifically, the Appellate Division accepted the argument, advanced by NYSUT and the State, that replacing administrators and supervisors (the vast majority of the employees in ESSAA bargaining units) is not as financially advantageous as replacing older classroom teachers. Supervisors and administrators are usually replaced by individuals closer in seniority (and salary) to the incumbents, while older classroom teachers are usually replaced by newer teachers who can be paid significantly less than the incumbents.

For those teachers who retired under the 55/25 Legislation, TRS has indicated that payment of the unreduced retirement benefit is subject to the final outcome of any appellate process. Accordingly, those teachers who retired under the 55/25 Legislation must wait and see whether the Appellate Division’s decision is appealed, and if so, whether the Court of Appeals accepts the appeal and affirms the Appellate Division. The ESSAA has 30 days from the date of the Appellate Division’s decision to decide if it will apply for permission to appeal to the New York Court of Appeals.
 

The New York State Department of Labor’s Hospitality Industry Wage Order, which is intended to combine and replace the Wage Orders formerly applicable to the Restaurant Industry and Hotel Industry, became effective on January 1, 2011. The Department of Labor has issued a notice to employers that it will exercise discretion with regard to enforcement until February 28, 2011, in order to allow employers sufficient time to come into compliance, but expects that employees covered by the Wage Order will be paid any additional wages owed to them by March 1, 2011 or the next regularly scheduled pay day after March 1, 2011. The additional wages must be computed retroactively to January 1, 2011. Employers covered by the Wage Order are required to post a notice to employees regarding the implementation period and their right to retroactive payment of wages.

The Wage Order makes several changes to the rules governing the payment of wages to employees in restaurants and hotels. Some of the significant changes are described below.
 

Tip Credit

Under the former Restaurant Industry Wage Order, employers were required to pay food service workers at least $4.65 per hour, as long as the tips received by those workers added to their hourly wages equaled or exceeded the minimum wage of $7.25 per hour. Under the new Hospitality Industry Wage Order, food service workers must receive an hourly wage of at least $5.00 per hour, as long as the amount of their tips added to their hourly wages is sufficient to equal or exceed the minimum wage. Service employees who do not work in resort hotels must be paid at least $5.65 per hour (up from a minimum of $4.90), as long as the amount of their tips added to their hourly wages is sufficient to equal or exceed the minimum wage. In resort hotels, service employees may be paid a minimum of $4.90 per hour (up from $4.35) as long as the weekly average of their tips is at least $4.10 per hour.

In order to pay the reduced minimum wage to a tipped employee, employers must notify the employee of any tip credit that will be taken as part of its new hire notice. If any changes are made to the employee’s hourly wage, a new notice must be provided containing the same information.

If a tipped employee works in a non-tipped occupation for two hours or more in a day, or for more than 20% of his or her shift during a day, the employer is not entitled to take any tip credit for any hours worked during the day, and must pay at least the full minimum wage of $7.25 per hour for all hours worked.

Tip Pooling and Tip Sharing

Employers covered by the Wage Order may require directly tipped food service workers to share their tips with other food service workers who participated in providing the service to customers and may set the percentage to be given to each occupation. Employers may also require food service workers to participate in a tip pooling arrangement. Only certain types of employees are eligible to receive shared tips or distributions from a tip pool. Those occupations include: (1) wait staff; (2) counter personnel who serve food and beverages; (3) bus persons; (4) bartenders; (5) service bartenders; (6) barbacks; (7) food runners; (8) captains who provide direct food service to customers; and (9) hosts who greet and seat guests. Employers are required to keep detailed records relating to tip sharing or tip pooling arrangements for at least six years.

Call-In Pay

The Wage Order provides that an employee who reports for duty by request or permission of the employer must be paid at his or her “applicable wage rate” for at least three hours if called in for one shift, six hours if called in for two shifts, or eight hours if called in for three shifts. The phrase “applicable wage rate” is defined as the employee’s regular or overtime rate of pay, whichever is applicable, minus any customary and usual tip credit. This is a change from the former Wage Orders, which required payment at the “applicable minimum wage rate.”

Spread of Hours

Under the Wage Order, any employee whose spread of hours from the beginning to the end of the work day exceeds ten is entitled to an additional hour of pay at the basic minimum hourly wage rate, regardless of the employee’s regular rate of pay. Therefore, employers are no longer permitted to a take a credit toward this spread of hours payment for wages paid to an employee in excess of the minimum wage for the other hours worked in the day.

Uniforms

The uniform maintenance allowance amounts remain the same under the Wage Order, but two exceptions have been created. First, under the “wash and wear” exception, an employer is not required to provide any uniform maintenance allowance if the uniforms: (1) are made of “wash and wear” materials; (2) can be washed and dried with other garments; (3) do not require ironing, dry cleaning, daily washing, commercial laundering, or other special treatment; and (4) are furnished in sufficient number consistent with the average number of days per week worked by the employee. Second, an employer is not required to provide any uniform maintenance allowance if it informs the employee in writing that it will launder the uniforms free of charge and the employee chooses not to use the employer’s laundry service.

Meal Credit

The amount of credit that an employer in the hospitality industry may take for providing an employee with a meal has been increased from $2.10 to $2.50 per meal.
 

Last month we posted on the EEOC’s GINA regulations and discussed the inadvertent disclosure exception and family medical history. This post follows up by discussing the impact of the regulations on FMLA certifications and by providing some recommended affirmative steps employers should take now.

As we discussed last month, the regulations recognize that employers may inadvertently obtain genetic information when they request that health care providers complete certification forms to support a leave under the Family and Medical Leave Act (“FMLA”) or an accommodation under the Americans with Disabilities Act (“ADA”). The regulations, however, create a “safe harbor” for employers who use the following language when requesting medical information to certify an employee’s own serious health condition under the FMLA:
 

The Genetic Information Nondisclosure Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting or requiring genetic information of an individual or family member of the individual, except as specifically allowed by this law. To comply with this law, we are asking that you not provide any genetic information when responding to this request for medical information. ‘Genetic Information’ as defined by GINA, includes an individual’s family medical history, the results of an individual’s or family member’s genetic tests, the fact that an individual or an individual’s family member sought or received genetic services, and genetic information of a fetus carried by an individual or an individual’s family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services.

Employers should not use the “safe harbor” language when they are requesting information to certify a family member’s serious health condition, as opposed to the employee’s own serious health condition. GINA includes an additional exception that allows employers to ask for “family medical history” when seeking certification of a family member’s serious health condition.

In light of the new GINA regulations, employers should take affirmative steps to reduce the risk of inadvertently obtaining genetic information about their employees, including the following:

• Update FMLA certification forms to include “safe harbor” language, when appropriate.
• Include “safe harbor” language on other requests for medical information, such as requests for documentation of an employee’s need for an accommodation and fitness-for- duty certification.
• Inform health care providers not to gather family medical history or other genetic information during fitness-for-duty examinations or during medical examinations to certify an individual’s ability to perform his or her job.
• Educate HR personnel, managers and supervisors about what constitutes protected genetic information and how to avoid making inadvertent requests for such information.
• Ensure that internal policies and procedures comply with the new GINA regulations.
• Review workplace “wellness programs” to ensure that the health assessment and other forms do not require the disclosure of genetic information without the employee’s prior voluntary, knowing, and written authorization.
• Post the new EEO poster which contains added information about GINA.
• Ensure that the genetic information, like medical information, is maintained in a confidential file, separate from the employee’s personnel file.
   

Sensibly, the EEOC does not make any effort to conceal its enforcement “playbook.” To the contrary, it publishes an annual Performance and Accountability Report so that employers and other stakeholders will have a better understanding of how the agency has used, and intends to use, its financial and human resources. The 2010 Performance and Accountability Report, released in mid-November 2010, contains the EEOC’s assessment of its performance as the federal agency with the broadest responsibility for enforcing the civil rights laws. Based on information contained in the report, a few general observations about the direction of the Agency can be made.

1. The EEOC’s Financial and Human Resources Continue To Grow.

For fiscal year 2010, the EEOC received a $367.3 million appropriation (a 7% annual increase). Most of this increased funding was used to add personnel. EEOC employed 2,385 FTE employees during 2010 (an 11% increase since 2007) and plans to grow its work force by 8% in 2011 to 2,577 FTE employees. More resources and more employees should result in more aggressive enforcement efforts by the EEOC.

2.  Greater Resources Will Enhance EEOC's Strategic Enforcement Initiative.

In April, 2006, the EEOC launched a program designed to identify, investigate, and litigate “systemic cases” – cases involving an allegedly discriminatory pattern, practice, or policy which has a broad impact on an industry, profession, company, or geographic location. This systemic initiative is one of the EEOC’s top priorities, because such cases affect large numbers of individuals.

At the close of fiscal year 2010, the EEOC was conducting 465 systemic investigations, involving more than 2,000 charges, and had completed work on 165 systemic investigations – resulting in 29 settlements or conciliation agreements that recovered $6.7 million. Systemic cases are highly complex and require greater resources (for example, expert analysis by statisticians, industrial psychologists, and labor market economists). As a result, it is likely that the EEOC will devote a substantial portion of its expanding resources and staff to its systemic initiative. The message for employers is simple. Review your written employment policies and your unwritten employment practices to insure compliance with recent changes in the law.

3.   Employers Should Seriously Consider The EEOC’s Mediation Program.

Despite its expanding resources and personnel, the EEOC has continued to struggle to meet its time target for resolving private sector discrimination charges. During fiscal year 2010, only 38.3% of the private sector charges filed with the EEOC were resolved in less than 180 days - substantially less than the EEOC’s 2010 target (48%) and much worse than its performance in 2005 (66%). In fact, the Office of Inspector General has identified the continued rise in private-sector charge inventory as one of the most significant management challenges facing the EEOC. In its defense, however, EEOC did receive a record number of discrimination charges during fiscal year 2010 (99,922).

Delays in investigating and making a determination on pending discrimination charges can have a significant monetary impact on employers. Considering that the standard remedy for disparate treatment discrimination is back pay and benefits, an employer’s potential financial exposure escalates during the time that a discrimination charge is pending before the EEOC. For that reason, an employer defending a discrimination charge should seriously consider using the EEOC’s mediation program – which has earned praise from both charging parties and employers. Indeed, during fiscal year 2010, 96.7% of all participants reported that they would use the EEOC’s mediation program in the future. Participating in the EEOC’s mediation program might produce a timely and successful resolution and will not derail or substantially delay the EEOC’s investigative process should mediation not prove successful.

A version of this post was previously published in the Rochester Business Alliance, Regional Chamber of Commerce Newsletter for January/February 2011.

 

The use of credit histories in the hiring process is coming under increased scrutiny by the Equal Employment Opportunity Commission. On December 21, 2010, the EEOC filed suit against Kaplan Higher Education, alleging that Kaplan’s use of credit history as a selection device is discriminatory because it screens out a disproportionate number of black applicants. The suit seeks injunctive relief barring Kaplan from using credit histories, as well as lost wages, benefits and offers of employment for applicants who were not hired due to the practice.

The lawsuit is not surprising given the EEOC’s earlier attention to this issue. In October 2010, the EEOC held a public hearing on the topic to explore whether the practice is discriminatory. Critics of the practice describe it as a “Catch-22” for applicants: you cannot establish good credit unless you have a good paying job, but you cannot get hired if you have poor credit. The EEOC is concerned that minority groups typically have poorer credit, and therefore the practice has a disparate impact on those groups. There is also a question of whether credit histories have any real predictive value when it comes to employment.
 

The issue has the attention of Congress and state legislatures as well. In 2009, the Equal Employment for All Act was introduced in the House. This bill would prohibit an employer from using information regarding a person’s credit history or credit worthiness in employment decisions, with some exceptions. A similar bill was also introduced in New York in 2009. Several states already limit the practice, including Illinois, Hawaii, Oregon, and Washington.

In light of the position taken by the EEOC, employers should re-evaluate their use of credit histories. An across-the-board approach which uses credit checks for all applicants presents the greatest risk of a disproportionate impact claim, and it will be the most difficult to successfully defend. In a disparate impact suit like the one filed against Kaplan, the employer may have to show that the selection criteria is “job-related” and “consistent with business necessity,” and that there are no less discriminatory alternatives available. For that reason, employers should limit the review of credit history to positions where there is a strong nexus between a person’s credit history and the position for which he or she is applying. The most obvious examples are positions involving direct access to the employer’s or client’s funds, particularly for individuals in higher level positions such as a controller or store manager. Although such a limitation will likely make a lawsuit easier to defend, it may not be sufficient to avoid being sued. According to the Kaplan complaint, the company used credit checks only for employees whose responsibilities included financial matters, such as advising students on financial aid.

In addition, even in cases where it may be appropriate to review a credit history, that information should be used as a supplement to all the other information gathered in the interview and reference checking process. Employers should avoid making credit the determinative factor in denying employment.  Of course, all credit checks should be conducted in accordance with the requirements of the Fair Credit Reporting Act and similar state laws.
 

On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“Tax Relief Act”), which generally extended the Bush-era tax reductions through December 31, 2012. The Tax Relief Act also includes several employee benefits-related extensions of interest to employers.

Educational Assistance Programs

Section 127 of the Internal Revenue Code (“Code”) permits an employer to maintain a program to provide tax-free educational assistance to its employees, provided that certain eligibility and nondiscrimination requirements are satisfied. A qualified educational assistance program may provide up to $5,250 in tax-free educational assistance for the payment of tuition and related expenses for undergraduate and graduate level coursework. Code Section 127 was scheduled to expire on December 31, 2010. The Tax Relief Act extends the application of Code Section 127 through December 31, 2012, allowing employers to continue to provide tax-free educational assistance to their qualifying employees for an additional two years.

Adoption Assistance Programs

Code Section 137 permits an employer to provide tax-free adoption assistance benefits (up to $13,360 per eligible child for 2011) to its employees, subject to the satisfaction of certain eligibility and nondiscrimination rules. Code Section 137 was scheduled to expire on December 31, 2011. However, the Tax Relief Act extends the application of Code Section 137 through December 31, 2012.

Mass Transit and Vanpool Benefits

Under current law, an employee may exclude from income up to $230 per month in qualified employer-provided mass transit and vanpool benefits (along with employer-provided parking benefits), provided that the program satisfies the requirements of Code Section 132(f). However, the permitted exclusion amount for mass transit and vanpool benefits was scheduled to be reduced to $120 per month after December 31, 2010. The Tax Relief Act extends the $230 monthly exclusion amount for employer-provided mass transit and vanpool benefits through December 31, 2011. The exclusion for employer-provided parking benefits is not subject to this sunset provision.
 

Last month, we posted on the NLRB’s renewed focus on remedies, including the use of federal court 10(j) injunction proceedings in cases involving discharges of union organizers. Last week, the NLRB’s Acting General Counsel, Lafe E. Solomon, issued a memorandum to Regional Directors discussing other remedies they should seek in cases involving alleged employer unfair labor practices committed during a union organizing campaign. The expressed rationale for this initiative is that stronger remedies are often required for unfair labor practices committed during a union organizing campaign in order to ensure a fair election. One cannot help but wonder, however, if the Board’s new-found emphasis on remedies related to organizing campaigns is not designed to compensate for the Obama administration’s inability to fulfill its promise to its union supporters by passing the Employee Free Choice Act.

One of the alternative remedies would require a member of management to read the Board’s notice of violation to all employees (or have the Board Agent read it in the presence of a management employee), instead of simply posting it on the bulletin board. The Acting General Counsel believes the information in the notice is more likely to reach all employees if it is read to them, and that a personal reading “places on the Board’s notice the imprimatur of the person most responsible” for the violation. In other words, the employees are more likely to think the notice means something if it is read to them by a member of management.

Another alternative remedy on which the memorandum focuses is permitting union access to employees in cases which involve unfair labor practices which have an adverse impact on employee-union communication. The memorandum concludes that in such cases, the appropriate remedy may be to allow the union to post information on the employer’s bulletin board, or to provide the union with the names and addresses of employees so that it can communicate with them directly. The memorandum also concludes that in rarer cases, the best remedy may be to permit the union to hold captive audience meetings with the employees as often as the employer does so, or to allow the union access to employees in non-work areas during non-work time.

When will the Regional Directors be justified in seeking such remedies? The memorandum suggests that whenever a Regional Director has a discharge case warranting a 10(j) injunction proceeding, a notice-reading remedy should be sought. In addition, the memorandum appears to leave little doubt that the notice-reading remedy should be considered in cases involving so-called “hallmark violations,” cases involving threats of discharge, layoffs, or plant closure. But it goes much farther, and discusses at length how lesser violations, such as grants or promises of benefits, solicitation of employee grievances, and improper employer interrogation or surveillance can have a severe impact on employee free choice. The memorandum appears to encourage the Regional Directors to consider seeking the notice-reading remedy in all cases where such typical 8(a)(1) violations are “serious.” It also states broadly that: “When the employer’s unfair labor practices interfere with communications between employees, or between employees and a union, Regions should also seek union access to bulletin boards and employee names and addresses.” Nowhere does the memorandum explain what types of violations are those which interfere with communication. Presumably, an employer’s enforcement of an improper no-solicitation, no-distribution policy would be sufficient.

Only time will tell whether these alternative remedies are used by the Regional Directors in unusual cases when needed to remedy serious employer unfair labor practices in order to obtain a fair election, or are used routinely in an effort to give unions a leg up in organizing campaigns. In the meantime, the threat of these alternative remedies is yet another reason for employers to be extremely careful when responding to union organizing campaigns and to train their managers and supervisors to avoid committing unfair labor practices.
 

Providing further evidence that the Obama National Labor Relations Board will be highly activist and pro labor, the Board has proposed a new rule  which would require employers to post a notice informing employees of their National Labor Relations Act (“NLRA”) rights, including the right to: organize a union; form a union; bargain collectively through a union representative; and engage in concerted activity with other employees.

The Board justifies the rule as necessary based on presumption that  most employees are unaware of their rights under the NLRA to engage in protected concerted activities and form unions. The Board believes that requiring a notice posting by all employers will inform employees of their rights and will also dissuade employers from engaging in unfair labor practices under the NLRA.
 

The proposed rule would require every employer to post an 11 by 17 inch poster, and distribute the notice electronically if the employer customarily communicates with employees electronically. Concerning the content of the notice, the Board has proposed using language adopted by the Department of Labor (“DOL”) for its rule requiring Federal contractors and subcontractors to post a notice of employees’ rights under the NLRA. According to the Board, using DOL’s posting also would allow employers who have already posted DOL notices to be in compliance without posting a new notice.

Proposed sanctions for employers who fail to comply with the rule include treating the failure to comply as an unfair labor practice under the NLRA. The Board has also proposed tolling the NLRA’s six month statute of limitations on the filing of an unfair labor practice charge if the employer fails to post the required notice.

Republican Board Member Brian Hayes has dissented from the proposed rule and believes the Board lacks statutory authority to promulgate it. Hayes also believes the Board lacks the authority to impose the proposed remedies.

The proposed rule is subject to a sixty day comment period. Public comment on the proposed rule can be submitted electronically to www.regulations.gov, or by mail to Lester A. Heltzer, Executive Secretary, National Labor Relations Board, 1099 14th Street, N.W., Washington, DC
 

In a move akin to delaying Christmas after all the hard work of shopping, wrapping and baking is done, the IRS (and the Departments of Labor and Health and Human Services) have delayed compliance with the nondiscrimination requirements of the Affordable Care Act until after regulations or other administrative guidance are issued (IRS Notice 2011-1).  The nondiscrimination rules would otherwise apply to insured, non-grandfathered group health plans for plan years beginning after September 23, 2010. Grandfathered insured plans are required to comply beginning with the first plan year grandfathered status is lost.

Section 2716 of the Affordable Care Act (the preferred moniker for the Patient Protection and Affordable Care Act, or “Healthcare Reform”) requires insured group health plans to satisfy the requirements of section 105(h)(2) of the Internal Revenue Code (“Code”). Code Section 105(h)(2) prohibits discrimination in favor of highly compensated individuals as to eligibility to participate, and benefits provided. A highly compensated individual is defined as one of the five highest paid officers of the employer, a 10 percent or greater shareholder, or (with some exclusions) an individual among the highest paid 25% of all employees when ranked by compensation. Section 2716 also provides that “rules similar to” the nondiscriminatory eligibility classification test, nondiscriminatory benefits test and the controlled group rules of Code Section 105(h)(3), (4) and (8), respectively, shall apply. Failure to satisfy these requirements could result in a hefty excise tax being imposed on the employer: $100 per day per individual discriminated against.

In September, Notice 2010-63 requested comments about the guidance needed in order to satisfy the nondiscrimination requirements. In addition to guidance concerning the meaning of “rules similar to” Code Section 105(h), commentators noted that compliance prior to 2014, when the State Exchanges and individual and employer responsibility and penalty provisions take place, would be difficult without substantial guidance. The Notice acknowledges that guidance is required with respect to such questions as whether the rate of employer contribution is a “benefit” that must be provided on a nondiscriminatory basis, whether the nondiscrimination standards can be applied separately to distinct geographic locations, how the rules apply to expatriates and inpatriates, treatment of employees who voluntarily waive coverage, and whether paying for the coverage of highly compensated individuals on an after-tax basis affects the nondiscrimination requirements, among other things.

Comments will be accepted by the IRS on the application of the nondiscrimination requirements until March 11, 2011. It seems unlikely we will see proposed regulations until close to the end of 2011, at best.

Employers who have already adjusted health plan eligibility and premium contributions in an effort to comply with the Affordable Care Act may wish to re-evaluate the changes made. Keep in mind, however, the Code Section 125 rules for changing pre-tax premium payments once the plan year has begun: changes in elections are only permitted in limited circumstances -- unless, of course, we get Section 125 relief in connection with this 11th hour nondiscrimination reprieve.
 

To date, three federal courts have ruled on the constitutionality of the section of the Patient Protection and Affordable Care Act (“PPACA”), which, beginning in 2014, imposes a monetary penalty on individuals who are not covered by adequate health insurance. The coverage requirement is commonly known as the individual mandate.

On December 13, 2010, Judge Henry E. Hudson of the United States District Court for the Eastern District of Virginia ruled that the individual mandate is unconstitutional and not enforceable. This decision conflicts with two prior Federal court decisions, one from the Eastern District of Michigan and one from the Western District of Virginia. In those cases, the courts held that the individual mandate is constitutional.

Most recently, on December 16, 2010, the constitutionality of the individual mandate was argued before Judge Robert Vinson in the Northern District of Florida. The Northern District of Florida case, which has not yet been decided, was brought by twenty states and challenges the PPACA on several grounds, including the constitutionality of the individual mandate. The constitutionality of the individual mandate is likely to be determined eventually by the United States Supreme Court.

Despite the current uncertainty created by the conflicting court decisions, senior White House officials have said that the Obama Administration will continue to work vigorously to implement the PPACA. With respect to those PPACA provisions that become effective before 2014, employers and group health plan sponsors should do the same thing. Even though the individual mandate is not scheduled to become effective until 2014 (and may not become effective at all), employers and group health plan sponsors should continue to implement applicable PPACA requirements that took effect in 2010 or that will take effect beginning in 2011.
 

On Monday, December 13, 2010, Governor Patterson signed the Wage Theft Prevention Act, which broadens greatly the Department of Labor’s enforcement powers, imposes new and expanded notification requirements on employers, and increases significantly employers’ potential liability for violations of the Labor Law. A summary of the major changes, which take effect on April 12, 2011, is provided below.

Notice Requirements

The Act makes significant changes to section 195 of the Labor Law by requiring employers to provide even more information to employees, both upon hire and on or before February 1 of each following year. Required information now includes, among other things: pay rates, basis of pay rate, how the employee will be paid (e.g., hour, shift, week, salary, etc.), any allowances claimed as part of the minimum wage, the regular pay day, and “such other information as the commissioner deems material and necessary.” Employers must provide this documentation in both English and in the employee’s primary language and maintain accurate records for six years. The Commissioner of Labor will establish dual-language templates for purposes of complying with these changes.

Failure to provide notice as required by section 195 within ten business days of the employee’s first day of employment allows either the Commissioner or the employee to bring an action to recover damages of $50 for each work week that the violation occurred, plus costs and reasonable attorney’s fees. Damages recoverable for prevailing employees are capped at $2,500. No such maximum applies for actions brought by the Commissioner.
 

Wage Statements

Section 195 is further amended to require employers to provide employees with a detailed wage statement with every payment of wages. Required information includes, among other things: the dates of work covered by that payment, the rate and basis of pay (e.g., whether by hour, shift, week, salary, etc.), and any allowances claimed as part of the minimum wage. For non-exempt employees, employers must also provide the employee’s regular hourly rate, overtime rate, the number of regular hours worked, and the number of overtime hours worked.

The Act allows both employees and the Commissioner to bring legal action for failure to provide such information. Damages include $100 per week for each week the violation occurs, not to exceed $2,500 for employee-initiated legal action, plus costs and attorney’s fees.

Liquidated Damages

Another significant change to the Labor Law is the increase in available liquidated damages. Previously, an employee who prevailed in a court action alleging a failure to pay wages received the total amount of the underpayment, costs, attorney’s fees, and, in some instances, liquidated damages equal to 25% of the underpayment. As amended, section 198.1-a now permits a prevailing employee to recover payment of all wages due, costs, attorney’s fees, prejudgment interest, and (unless the employer proves a good faith basis to believe the underpayment was lawful) liquidated damages equal to 100% of the total wages due.

Anti-Retaliation Protection

Several key changes to the Labor Law’s anti-retaliation protections have been made, such as requiring “any person” found to have engaged in unlawful retaliation to pay liquidated damages of up to $10,000, along with costs and attorney’s fees. In addition, retaliation is now listed as a class B misdemeanor.

While the Act does not take effect until next April, employers should begin reviewing their payroll practices to determine what they will have to change to comply with the new notice and wage statement requirements.