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Healthcare Plans Developing and Unraveling - One Attorney's Opinion

March 7, 2013 -

Both employers and labor unions are starting to see the effects of Obamacare kicking in, and adjusting their plans accordingly. Many stark realities are now becoming apparent that may not have been anticipated.

First, Obamacare really did not really address healthcare costs, which continue to increase. As a matter of fact, there are new estimates from the Internal Revenue Service indicating that even a “cheap” family plan will cost $20,000 a year by 2016 to cover two adults and three children. At least for 2014, employers will not be required to provide dependent coverage as part of “minimum essential coverage” to avoid penalties under the new law.  However, the requirement of providing dependent coverage will kick in during 2015, at least under current regulations.

Labor unions, once a stanch supporter of Obamacare, now have serious doubts about it. A recent article in a union publication is entitled “Union Health Plans Will Suffer Under Obamacare.” The reason labor unions are becoming particularly concerned about Obamacare is that union healthcare plans (often called “multi-employer plans”) generally require all employees to participate, and employers to contribute for all employees. While this structure is supposed to drive down the per-employee healthcare cost, it has no similar savings to the employer and yet, employees would not have regular (and cheaper) access to the state exchanges, because the employer under the union-run plans may be providing “minimum essential coverage.”

As a result, with the union-run healthcare plan approach in Obamacare, employers are disadvantaged because they are paying for all employees and the employees themselves are disadvantaged because they do not have regular access to the state exchanges and the various available tax credits. Further, employers will be disadvantaged because they will not have access to the insurance market available through the exchanges, or the ability to simply stop offering coverage and provide their employees with money to assist in buying coverage on the state exchanges.

Even when an employer elects to be penalized by opting out of healthcare coverage, discontinuing coverage may be cheaper for the employer than any type of union-run plan. Without a union plan, employees can purchase their own coverage at the state exchanges at reduced rates, and with tax subsidies. Furthermore, an employer may provide an employee the money necessary to purchase the coverage on the state exchanges, and even throw in an extra amount for the workers’ increased taxes. In the process, employers can still save about half of their healthcare costs.

Labor organizations are also concerned about the fact that, with government healthcare plans available, one of the main reasons to unionize has gone away. Much like years ago when the various employment laws took away many of the reasons to unionize, the availability of government-run healthcare means that the promise of a union contract contributes nothing towards healthcare, and indeed, may really be a detriment to employees.

Further, unionized employers now have every incentive to get out of their union-run healthcare plans, and possibly out of the union itself. The employees may have the same incentive, since they see opportunities available in healthcare in the state exchanges that are less costly and more beneficial than those under the union-run plans.

Large employers (with 50 or more full-time employees) who intend to continue their own healthcare plans after 2013 are now realizing they need to pay a lot of attention to whether they are maintaining “minimum essential coverage under an eligible employer-sponsored plan” and thus avoiding the penalties. If minimum essential coverage under an eligible employer-sponsored plan is not maintained for 95% of the employer’s entire workforce, the employer may be liable for non-deductible penalties of $2,000 per employee for nearly all of its workforce in the U.S. This requirement to maintain “minimum essential coverage under an eligible employer-sponsored plan” is particularly important as many employers are experimenting with other variations of the healthcare plans, including individual healthcare accounts and the like, that may or may not provide the type of coverage that will avoid the penalties. Further, employers may need to review whether their plans have maintained grandfathered status. Unfortunately, many employers have relied on their insurance company, insurance brokers, and third party administrators to do all the technical things necessary to maintain grandfathered status, and often the necessary steps have not been taken. It is a fairly open question as to whether plans can be retroactively amended to take the necessary steps to maintain grandfathered status.

Another often overlooked fact is that even when employers maintain “minimum essential coverage under an eligible employer-sponsored plan,” they nevertheless may be liable for a penalty in circumstances where the premiums the employees must contribute exceed 9.5% of their household income or where the employers’ plans do not provide minimum value (which is determined by the federal government). For each employee who goes to the state exchanges in such circumstances, the employer may have to pay an additional $3,000 per year in penalties. At least in 2014, the speculation is that not many employees will go to the exchanges, because the penalty (which is unlikely to be collected) is only $95.00 (or 1% of income, if greater) per adult for each employee that has not signed up for coverage for the entire year. The penalties go up for 2015 to $325 (or 2% of income, if greater) per adult, which may cause more employees to participate in the employers’ healthcare plans and/or go to state exchanges for coverage. Also, the automatic enrollment provisions will likely kick in sometime in during 2014 for employers with 200 or more full-time employees, which may cause more employees to get coverage under the employers’ own plans.

 Questions? Need more information? Call Jim Wimberly, Jim Hughes, or Ray Perez at (404) 365-0900 or e-mail them at jww@wimlaw.com, jlh@wimlaw.com; rp@wimlaw.com

Supreme Court Restricts Retaliation Claims

Supreme Court Restricts Retaliation Claims

SUPREME COURT RESTRICTS RETALIATION CLAIMS - June 29, 2013

 In University of Texas Southwestern Medical Center v. Nassar, Case No. 12-484, the U.S. Supreme Court clarified the causation standard for retaliation cases that are brought under Title VII if the Civil Rights Act of 1964. Specifically, the Supreme Court held that Title VII retaliation claims must be proved according to the principles of "but-for" causation, and not by the "mixed motive" causation principles that apply to Title VII discrimination claims.

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Supreme Court Invalidates Major Portions Of Arizona State Immigration Laws

June 27, 2012 -

Many states have now passed their own version of immigration laws related to the large number of aliens who do not have a lawful right to be in this country. Arizona has been one of the leaders in promulgating such laws, and four of the provisions of Arizona immigration laws are addressed in a June ruling of the US Supreme Court. Arizona v. U.S., ___ U.S. _____ (June 25, 2012). The question was whether the federal immigration laws preempt and render invalid these provisions of Arizona law. The federal government sued Arizona contending that its State laws intruded on the federal constitutional power to “establish a uniform Rule of Naturalization” and on the federal government’s inherent sovereign power to control and conduct foreign relations.

The Court started with the premise that the Constitution gives Congress the power to preempt State law. Federal statutes may contain an express preemption provision. In addition, States are precluded from regulating conduct in a field that Congress has determined must be regulated by its exclusive governance, and State laws are preempted when they conflict with federal law.

Adopting a broad interpretation of federal preemption principles, the Court concluded that 3 of the 4 provisions are preempted. The first provision made failure to comply with federal alien-registration requirements a criminal misdemeanor. The Court determined that this law gives Arizona the power to bring criminal charges against individuals for violating a federal law, even in circumstances where federal officials determine that prosecution would frustrate federal policies, and is thus preempted.

The second provision made it a criminal misdemeanor for an unauthorized alien to seek or engage in work in Arizona. The Court found that relevant federal provisions do not impose federal criminal sanctions on the employee (i.e., penalties on aliens who seek or engage in unauthorized work), and impose some civil penalties instead. It concluded that Congress decided it would be inappropriate to impose criminal penalties on aliens who seek or engage in unauthorized employment and it therefore follows that an Arizona law to the contrary is preempted.

 The third provision authorized state and local officers to arrest, without a warrant, a person the officer had probable cause to believe had committed any public offense that makes the person removable from the United States. The Court found that this provision gave state officers too much authority to arrest aliens on the basis of possible removability and allowed Arizona to achieve its own immigration policy and could result in unnecessary harassment of some aliens whom federal officials determined should not be removed.

 The fourth provision required state officers conducting a stop, detention, or arrest to make efforts, in some circumstances, to verify the person’s immigration status with the federal government. The Court rejected preemption of this particular provision, concluding that, without the benefit of a definitive interpretation from the state courts, it would be inappropriate to assume the provision will be construed in a way that creates a conflict with federal law.

 Five justices joined in the opinion of the Court, one justice does not take part in the decision, and there are three opinions by Justices Scalia, Thomas, and Alito concurring in part and dissenting in part. The dissenting opinions argue that the mere existence of federal action in the immigration area cannot be regarded as a prohibition on the State passing immigration legislation, pointing out the long history of the States’ traditional role in regulating immigration, and their sovereign prerogative to do so. These opinions suggest that States are entitled to have their own immigration policy so long as it does not conflict with federal law. Justice Scalia asserted that State officials need not heed “federal priorities” particularly if those priorities include willful blindness or deliberate inattention to the presence of removable aliens in a State. These opinions suggest that a State should be able to excise its own power to establish a penalty for a violation of federal law as part of the implementation of its own policies of excluding those who do not belong there. Justice Scalia concluded that the State laws under challenge do not extend or revise federal immigration restrictions, but merely enforce those restrictions more effectively. Justice Alito observed that the federal government argues that the State law may be preempted not because it conflicts with a federal statute or regulation, but because it is inconsistent with federal agencies’ current enforcement priorities, which are not law. He argued that this preemption argument gives the executive unprecedented power to invalidate state laws that do not meet with its approval, even if the state laws are otherwise consistent with federal statutes and duly promulgated regulations, an argument at odds with our federal system.

 Editor’s Note- This Supreme Court decision will likely result in many more challenges to various state immigration laws around the country. The ruling does seem to expand traditional concepts of federal preemption to the exclusion of state sovereignty. However, some may try to distinguish the ruling due to the relative uniqueness of the U.S. constitutional provisions regarding immigration and the sovereign power to conduct foreign relations.

 In response to the Court’s unanimous decision against the Obama Administration on the fourth provision, the Administration announced that it would no longer provide Arizona with law enforcement information about the immigration status of aliens, and that it had established a hotline for people to report concerns about civil rights violations.

 The high court’s ruling comes just days after the administration announced a new policy of not deporting illegal immigrants under age 30 who came to the U.S., or were brought to the U.S. before reaching age 16, who are in school, or have graduated from high school, gotten a general education certificate, or are military veterans.

 Questions? Need more information? Call Jim Wimberly, Jim Hughes, or Ray Perez at (404) 365-0900 or e-mail them at jww@wimlaw.com, jlh@wimlaw.com; rp@wimlaw.com

Supreme Court Green-Lights Mandatory Arbitration Clauses, Forestalling Class Actions: Could Be Good News For Employers

July 7, 2013 -

Will a mandatory agreement to submit disputes to one-on-one arbitration, bypassing class actions, hold up in court? The Supreme Court just said “yes” in a case involving credit cards – and this could be very significant news for employers who want to ensure that disputes with employees are handled confidentially, one at a time, rather than through protracted (and expensive) class actions in court.

 In American Express v. Italian Colors Restaurant, the restaurant wanted to accept American Express credit cards for payment. To do that, it had to enter into an agreement with the company that contained two important conditions. First, any dispute would have to be settled in one-on-one arbitration: no class actions allowed. Second, if it wanted to take American Express credit cards, it also had to agree to take the company’s debit cards. Retailers must pay high fees for both privileges, and the fees for debit card purchases are particularly high.

 The restaurant and a number of other merchants decided to sue American Express, claiming that the debit card requirement was an illegal “tying” arrangement that violated the antitrust laws. But since all of the merchants had signed the one-on-one arbitration agreement as a condition of accepting the cards, American Express said they couldn’t file a lawsuit, let alone a class action. The trial court agreed with American Express and dismissed the case, but the Court of Appeals agreed with the merchants and reversed, in part because enforcing the one-on-one arbitration requirement would make it prohibitively expensive to litigate the antitrust claims. American Express asked the Supreme Court for review.

 The Supreme Court came down squarely in favor of enforcing the arbitration agreement between American Express and the merchants. Justice Scalia, writing for the majority, found that abiding by the agreement between the parties was more important than any other consideration (such as enforcing the antitrust laws). Italian Colors had signed an agreement with American Express that precluded class actions, and was bound by its terms.

 The American Express decision is consistent with the Court’s other recent class action decisions, Dukes v. Wal-Mart and Comcast, which focused on the necessity to look at injuries and damages on an individual level rather than engaging experts to argue collectively. Class actions are where the big money is in litigation, although less for the class members, who often receive coupons entitling them to discounts from wrongdoing retailers, than for the lawyers, who routinely collect 7-or 8-figure fees. The expense of defending a class action, and the risk of financial ruin if you lose, often all but force a company to settle, even if they believe they would win in the end.

 So, what does this mean for employers? Potentially, a lot. All three of these Supreme Court decisions make it more difficult for litigants to bring class action claims in the future. What the American Express decision adds to the mix is that an agreement to arbitrate disputes one-on-one, rather than through a class action, will be honored. Employee-rights organizations will protest, but employers could require the same sort of agreements as a condition of employment, thereby protecting themselves from exposure to class action suits for back wages, discrimination, or other alleged violations. If you don’t think that will be important, just ask any employer who’s been on the receiving end of a class action.

Questions? Need more information? Contact Larry Stine at (404)365-0900 or jls@wimlaw.com;

or Elizabeth Dorminey at bdorminy@bellsouth.net.

Obama Administration Postpones Employer Penalties and Certain Other Requirements Until After 2014 Elections

July 12, 2013 -

On July 2, 2013, in a Treasury Department blog post, the Obama administration announced that it will postpone the effective date of several requirements imposed on employers. The administration will publish details of the relief being granted in the near future.

The blog post indicates that large employers (those with 50 or more employees) will not be subject to the employer shared responsibility payments until 2015. In other words, for 2014 only, large employers who do not offer health coverage to at least 95% of their employees will not have to pay a penalty of as much as $2,000 per employee per year for all employees (less 30) if just one employee obtains tax subsidized coverage in a State Exchange. Also, for 2014 only, employers, who offer health coverage that is not affordable or that does not provides minimum value, will not have to pay a penalty of as much as $3,000 per year for each employee that obtains tax subsidized coverage in a State Exchange.

The blog post also mentions that, for 2014 only, employers will not have to comply with certain information reporting requirements. All employers will not be required to file information returns that include details about the employees who have employer-provided health coverage, the type of coverage, and the premiums paid. Large employers will not have to submit information returns that disclose information about their health coverage and their full-time employees and that are necessary for determining the employer and individual penalties.

This transitional relief does not yet extend to employees. Employees may have access to tax subsidized coverage in the State Exchanges and may be subject to the individual penalties if they do not have minimum essential coverage. On July 9, White House Press Secretary Jay Carney said that the individual mandate would take effect as planned, although Republican leaders are calling for the same one-year delay for individuals as has been granted for employers.

What does this transitional relief mean for large employers? Large employers who offer health care coverage to their employees still must prepare for implementation of all other Obamacare requirements that become effective in 2014, such as reducing the waiting period for coverage to no more than 90 days. Otherwise, such employers will be subject to other penalties imposed by federal law and to lawsuits by employees based on violations of their rights under Obamacare and other federal laws. Large employers who do not offer health care coverage to their employees may have another year to decide whether to offer coverage.

There have been many comments as to the reasons for the delay. The Administration stated that the decision is one of accommodating business, but many questions remain as to whether the government is ready to implement the new law. Regulations have not been issued in many areas, including regulations covering information that was to be provided to each employee starting October 1, 2013, as to options of participating in the state exchanges, and regulations necessary for reporting data to the government. Further, reports indicate that the new computer systems necessary to implement the law have not yet been installed. Indeed, the Government Accountability Office has reported that various steps are still necessary for building the state exchanges.

Employers need to follow carefully subsequent developments and hopefully guidance that will come out concerning notices that were to be issued to employees beginning October 1.

Questions? Need more information? Contact Jim Hughes at (404)365-0900 or jlh@wimlaw.com or James W. Wimberly, Jr. at (404)365-5609 or jww@wimlaw.com.

How Supreme Court Gay Marriage Ruling Affects Employers

August 16, 2013 -

In a ruling issued by the U.S. Supreme Court on June 26, 2013, the Court declared unconstitutional Section 3 of the federal Defense of Marriage Act (DOMA), which defines marriage as a legal union between a man and a woman for purposes of more than 1,000 federal laws. The majority indicated that by denying federal recognition to a marriage recognized as legitimate under state law, the federal law violated the Constitution's guarantees of equal protection and due process. U.S. v. Windsor, _____ U.S. _______ (June 26, 2013). A companion case, Hollingsworth v. Perry, addressed whether the 14th Amendment's equal protection clause prohibited the State of California from defining marriage as the union of a man and a woman. The Court did not reach the merits of this particular issue, but instead denied review on technical grounds leaving standing a lower court ruling that struck down California's Proposition 8, which banned gay marriage.

Technically, the Supreme Court rulings do not address whether there is a federal constitutional right for same-sex marriage under the laws of the various states, thus suggesting there will be further rounds of litigation addressing that particular issue. The ruling does not address a separate DOMA provision that states need not recognize same-sex marriages performed by other states. Justice Scalia, however, writing for the dissent, indicated that the majority has provided a "blueprint" for extending gay marriage nationwide.

In the meantime, the rulings of the Court will play out in the states in two ways. First, numerous legal challenges will be made in those states prohibiting same-sex marriages, and at the same time efforts will be made in the states to overturn legislatively the banning of same-sex marriages. Currently, at least eight states recognize full or limited civil unions or domestic partnerships, plus the District of Columbia. Over 30 states have laws or constitutional amendments prohibiting same-sex marriages.

The immediate effect of the ruling is that employers in those states that recognize same-sex marriages will have to review their employee-benefit packages to make sure they do not discriminate against gay marriages. Even in states that ban gay marriages, more and more employers will likely move to recognizing same-sex relationships in their benefit programs to be consistent with the trend in the U.S. both legally, but also in public opinion.

The Supreme Court ruling appears to immediately affect federal benefits and federally-regulated benefits, including 401(k) plans and pensions. Gay marriages will lead to the same privileges as beneficiaries enjoy like other married couples. In healthcare, changes will be required to provide equal tax treatment of health insurance premiums, as a gay spouse will have the same right as a heterosexual spouse to pre-tax premium deductions. The ruling will also affect various other federal laws including immigration, bankruptcy and student aid. On the other hand, same-sex married couples could also see the likelihood of federal income tax increases, although there may be savings in the federal estate tax.

The issue drawing everyone's immediate attention is what to do about gay spouses who are married in states allowing such marriages, but who currently live in states that do not recognize same-sex marriages. Under past practices, many federal benefits such as Social Security turn on the validity of a marriage under the law of the state where the couple resides. The IRS will have to address these issues. Employers will have to address similar issues.

A Teachable Moment: What Employers Can Learn From Paula Deen’s Experience.

A Teachable Moment: What Employers Can Learn From Paula Deen’s Experience

The national attention devoted to Paula Deen provides an excellent opportunity for employers to review their policies and procedures concerning harassment and inappropriate conduct in the workplace with all employees, but most particularly, supervisors and members of management. Supervisors and managers are the first line of an employer’s defense in the prevention of claims for harassment or discrimination.

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