Each employer with 50 or more full-time employees (30 hours or more per week) must provide employee-specific information to the IRS about the health coverage offered during 2015, whether healthcare benefits are offered or not. The employer must send a Form 1094-C to the IRS, which gives a company level overview of the benefits offered and hours worked, no later than February 29, 2016. An employer with more than 250 full-time employees must file electronically no later than March 31, 2016. In addition, the employer must provide each employee who was benefit eligible during 2015 with a Form 1095-C no later than January 31, 2016. The information will be used to enforce the ObamaCare mandate and determine the eligibility of individuals for subsidies on the healthcare exchanges. Individuals offered coverage at work aren't eligible for subsidies if the offered plan meets the ObamaCare standards for affordability and value. Coverage is treated as affordable if the required premium contribution from an employee for individual coverage does not exceed 9.5% of the worker’s wages. To provide minimum value, the plan must pay at least 60% of the cost of covered health services. Employers may request a 30-day extension of the reporting deadline, but there is no assurance that such an extension will be granted.
The information on these forms will include total employee headcount per month; health coverage for all full-time employees; name, Social Security number, date of birth, and address for employees and covered dependents; employees' share of the lowest monthly health insurance premium; and other data. The IRS will use this information to determine which employers and employees are complying with Obamacare's coverage requirements.
An employer can encounter problems in compiling this information into a single database. One part of this information may be in the payroll system or with the payroll vendor, which probably does not have the coverage and premium data. Another part of the needed information may be in the benefits administration system or with the benefits administrator, which might not have the individual employee and dependent data and might not be able to report on a monthly basis or easily populate the IRS form. A third possible source of information is the carrier, which has the coverage information for employees and dependents, but probably does not have the employee contribution data needed to determine affordability compliance.
Fines for incorrect employer reports can range from $50 per return if a mistake is corrected within 30 days of filing to $500 or more per return for intentional errors.
Also, effective January 1, 2016, small employers with 50-99 employees must provide healthcare coverage, while those with fewer employees remain exempt. The choice of such employers is to either pay a penalty that applies if at least one worker gets a subsidy to buy healthcare coverage through an exchange, which could total $2,160 for each full-time employee, not counting the first 30 employees.
Kiplinger suggests that 86% of employers plan to offer consumer-directed health plans in 2016, a significant increase over the last five years. Such plans combine a high deductible plan with a health savings account or some similar funding mechanism.
Employers must prepare quickly to determine whether they have sufficient information to timely file the health coverage reports. The solution: If you have not done so already, start now!
Two little known aspects of the so-called "budget deal" of the Bipartisan Budget Act of 2015, significantly affect employment. One provision amends the Federal Civil Penalties Inflation Adjustment Act of 1990 to require all agencies with civil monetary penalties covered by the statute to adjust those penalties to represent the change in the consumer price index (CPI), and annually thereaftaer. The initial "catch-up" adjustment could be as much as the inflation rate from 1990 through 2015. If OSHA were to choose the greatest catch-up increase allowed, about 82%, the maximum $70,000 fine for repeat and willful violations would grow to $125,438, and the $7,000 maximum fine for serious violations would rise to $12,744. Increasing the maximum fines in line with the CPI for the catch-up requires OSHA to publish an interim final rule by July 1, 2016, allowing the adjustment to take effect by August 1, 2016.
The second important employment-related provision of the budget deal repeals the automatic enrollment requirement of ObamaCare Section 1511, which requires employers with more than 200 employees to automatically enroll new full-time persons into a qualifying health plan offered by the employer and to automatically continue enrollment of current employees. Under the now repealed ObamaCare provision, automatic enrollment would become the "default" mechanism for newly-hired employees who take no action regarding healthcare enrollment, whereas under current law newly-hired employees must affirmatively elect to sign up for coverage. The effect of automatic sign ups would have been expected to increase significantly the number of employees covered by an employer's healthcare plan.
Some employers forget that minimum wage laws do not allow employers to charge employees for the purchase or rental of the uniforms and possibly cleaning to the extent it causes an employee’s pay to fall below minimum wage or statutory overtime. The situation particularly comes into play where employers charge employees a lump sum for uniforms rather than spreading the cost over several pay periods and for tipped employees who receive the minimum tipped amount of $2.13 an hour. However, the question remains as to what is a required company uniform as opposed to basic street clothing.
The U.S. Department of Labor (DOL) has general guidelines as to whether certain types of dress are considered uniforms. In general, where the employer requires a specific type and style of clothing to be worn at work, such as, a tuxedo or a shirt and blouse or jacket of a specific or distinctive style, color or quality, this clothing would be considered a uniform for purposes of the minimum wage laws. If the clothing has the employer’s logo is on it, Wage and Hour will call that clothing a uniform. On the other hand, if the clothing is a general type of basic street clothing with variations in details of dress, that is not considered a uniform for purpose of applying the minimum wage and overtime laws.
Unless the uniforms are “wash and wear” material that may be routinely washed and dried with other personal garments and do not require ironing or other special treatment, the employer must pay minimum wage employees one hour of minimum wage to cover cleaning the uniforms.
If the employer pays more than minimum wage, the employer may deduct the cost of the uniforms from the employee’s pay so long as the deduction does not reduce the pay below minimum wages or come from overtime pay. If the employer is paying $.05 an hour more than minimum wage, the employer can deduct $.05 times the hours worked that week up to 40 hours.
Employers need also to be mindful of the potential application of certain state laws. Some states, such as California, require employers to pay the cost of all required uniforms, not just those that affect the minimum wage or statutory overtime.
When an employer violates the I-9 paperwork or discrimination requirements, either USCIS (for paperwork violations) or the Office of Special Counsel for Immigration-Related Unfair Employment Practices (for discrimination violations) will initiate an action for penalties against the employer. The employer has the opportunity to settle or to fight. If the employer chooses to fight, the case will be tried before an administrative law judge in the Office of Chief Administrative Hearing Officer (OCAHO).
OCAHO decisions in 2015 illustrate that making mistakes in Form I-9 compliance can be expensive. In Employer Solutions Staffing Group, the employer representative who reviewed the original employee documents for purposes of Section 2 did not sign Section 2. Instead another individual signed Section 2. OCAHO imposed a penalty of $227,252 for these violations. In Niche, Inc., OCAHO fined the employer $63,850 because it continued to employ workers after their Employment Authorization Documents (EADs) had expired and the employer failed to re-verify these workers, who, in fact, had timely acquired new EADs. In Hartmann Studios, the employer failed to sign the Section 2 certification on 800 occasions and OCAHO imposed a penalty of $605,250. Other common mistakes that resulted in penalties included: (1) failing to ensure the completion of Section 1 by the employee, (2) failing to complete Section 2 properly, (3) backdating Form I-9, (4) failing to prepare or present Form I-9 in a timely manner, (5) failing to provide a document number or issuing authority in Section 2, and (6) failing to list documents from Lists A or B and C.
Another OCAHO decision demonstrates that an employer should have a verifiable, consistent and non-discriminatory business reason for each hiring or termination decision. In U.S. v. Estopy Farms, OCAHO ruled that the employer discriminated against a qualified U.S. citizen in favor of hiring qualified foreign workers because the employer provided a series of "shifting, inconsistent, and mutually contradictory explanations" to justify its decision not to hire the U.S. citizen.
An employer can reduce the risk of penalties from paperwork violations by conducting periodic (at least annual) audits of its Form I-9s. An employer can reduce the risk of immigration-related discrimination claims by training its personnel who are involved in hiring and termination. An employer also should rely on legal counsel who is experienced in these matters to make sure that all hiring and termination procedures comply with applicable law.
A few employers choose to litigate immigration penalty cases not only on the merits, but also on the excessiveness of the penalties. Review of recent decided cases suggests that OCAHO decisions do lower imposed penalties by an average of almost 50%, the most common reason being that the penalty should be adjusted to the mid-range of penalties and not be disproportionate to the employer's resources. There is also a Small Business Regulatory Enforcement Fairness Act that OCAHO has cited in a number of cases.
During late November, at a conference at the American Bar Association’s Labor and Employment Law Section, Solicitor of Labor Patricia Smith, stated it was likely that the new white collar eligibility rules will not be issued until late 2016. One of the reasons for the time frame is that DOL received approximately 270,000 comments about the proposed rules in the comment period that ended in early September.
The time frame of issuance of the final rules suggests that the new requirements may not go into effect until the beginning of calendar year 2017. The current minimum salary to meet the white collar exemption requirements is now approximately $24,000, and the proposed rules result in an increase to some $50,000. Obviously, the final rules may ultimately reach some in-between level, but the salary level is expected to be over $40,000.
There seems to be a trend developing among many employers of eliminating annual performance reviews, and instead relying on more constant feedback. Kiplinger reports that some 6% of Fortune 500 employers have recently eliminated the process and that many more are likely to follow. The theory is that ongoing feedback on a quarterly, monthly or even weekly basis is more effective, and also saves time and money. Many management personnel dread the annual performance review, and many reviews tend to be the same for everyone or have the "halo effect," in which everyone is rated average or better. Such inflated reviews can actually make it more difficult for an employer should an employee be terminated and cite his favorable review as evidence of employment discrimination.
Some employers are moving toward systems in which supervisors keep performance logs for their subordinates, containing notes on performance both good and bad on a weekly or monthly basis. With such specific information, a supervisor then discusses the problem in concrete terms with the employee when the issue arises.