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DOL LAUNCHES PILOT PROGRAM ALLOWING EMPLOYERS TO RESOLVE PAYROLL ERRORS WITHOUT FEES OR PENALTIES

On March 6, 2018, the Wage and Hour Division of the U.S. Department of Labor (WHD) announced a pilot program designed to expedite resolution of payroll errors.  Dubbed with the convenient acronym PAID, the Payroll Audit Independent Determination program will allow employers to correct inadvertent overtime and minimum wage violations without having to pay fees, fines, or liquidated damages. 

Under the PAID program, employees will receive 100 percent of the back wages owed.  Employers – and employees -- will be spared any litigation expenses, attorneys’ fees, or other costs that may be applicable to private actions. WHD will assess the amount of wages due and supervise payment to employees. No penalties or liquidated damages will be imposed on employers who participate in the PAID program, self-report errors to WHD, and agree to future compliance.  The program is not open to employers currently being investigated or engaged in litigation.

WHD is implementing the pilot program nationwide for approximately six months, after which it will evaluate the results and decide whether to make it permanent.  Employers are encouraged to audit their compensation practices to identify and correct potential non-compliant practices. 

COMMENT:  PAID is an example of how DOL can be a compliance partner, not just an adversary to employers.  “Good faith” traditionally allowed employers to avoid liquidated damages where inadvertent errors were made.  The prospect of attorneys’ fees often makes FLSA cases an expensive “gotcha” for employers and an impediment to settlement.  PAID should help short-circuit the litigation lottery, getting employees made whole sooner without letting their attorneys get fat in the process.

More information concerning the pilot program is available at www.dol.gov/whd/paid

JOINT-EMPLOYER REVERSAL ITSELF RESCINDED

If employers thought they were in a state of confusion on joint employer issues, their state of confusion has now reached a new level.  In February 2018, this newsletter reported that the NLRB’s 2015 Browning-Ferris decision had been reversed by a December 2017 ruling in Hy-Brand.   The newer Hy-Brand NLRB ruling restored traditional NLRB law holding contractors only responsible for their subcontractors’ employees if they exercise direct control over their employment conditions.  The Browning-Ferris case had reversed that traditional rule, by holding the contractors responsible if they exercised only indirect control.

As a result of the Hy-Brand ruling, unions and certain Democratic senators complained that newly-appointed NLRB member Bill Emanuel had violated conflict-of-interest rules by participating in the case.  He had not represented any of the parties in the Hy-Brand case, but his former law firm had represented a subcontractor of Browning-Ferris.  Such a relationship traditionally had not been considered to violate any NLRB conflict-of-interest rules, but the Inspector-General found the NLRB conflict-of-interest standards to be inadequate.  Previously, NLRB appointees that had represented unions were nevertheless allowed to participate in cases involving their union.  In any event, on February 26, the NLRB vacated its Hy-Brand ruling leaving the status of the NLRB’s joint employer doctrine in even further confusion.  Part of the confusion is that currently there are two Democratic and two Republican members on the Board, and the newest appointee to the Board who has not yet been confirmed, is from a management-side firm that did some work for McDonald’s.  The new concept of conflict-of-interest suggested by the Inspector-General, and promoted by certain Democratic senators, makes it very difficult for a new majority to decide the current interpretation of the joint employer standard.  The Browning-Ferris case has been on appeal to the U.S. Court of Appeals for the District of Columbia Circuit, which has sought briefing from the parties on a request that the court take back the Browning-Ferris case which had previously been remanded to the NLRB to decide in light of the Hy-Brand ruling.  Thus, technically, the Browning-Ferris ruling is again current Board law.

TAX BILLS COMING OVER ACA ISSUES

Two forms of tax bills may be coming to employers this year concerning the ACA.  First, certain reporting requirements are required of employers who average 50 or more full-time employees.  Such employers who did not file Forms 1094-C and 1095-C in a timely manner will be subject to penalties of as much as $250 for each untimely disclosure to an employee and each filing with the IRS.  The IRS may reduce the penalty under certain circumstances and also has the discretion to abate any penalty if the employer shows reasonable cause.  Even some employers who timely filed may receive penalties based upon the information provided to the IRS being incomplete or incorrect.

Some employers are also getting estimates from the IRS of penalties they owe for not providing health coverage to employees in 2015.  2015 was the first-year employers had to report to the IRS about coverage under the ACA.  In 2015, employers with at least 100 full-time employees were required to offer affordable minimum essential coverage to at least 70% of full-time employees.  If that didn’t happen, employers could face a penalty of $2,080 for every full-time employee.

After receiving a letter, employers should check their records to see if the employees in question are actually full-time employees and also to make sure that the codes reported to the IRS in the forms were accurate.  Employers who discover errors need to tell the IRS about the problems they had and get the penalties corrected. 

STATUS OF CHANGES IN NATION’S HEALTHCARE POLICY

Although the administration has been unable to rescind the Affordable Care Act (ACA), better known as ObamaCare, the tax reform legislation repealed the individual mandate portion of the ACA.  Individuals will no longer be taxed if they fail to participate in healthcare programs.  The effect of the repeal of the individual mandate is that, in theory, greater numbers of persons will fail to participate in healthcare programs, thus limiting the expansion of healthcare coverage in the U.S.  Proponents of the ACA contend that it resulted in an additional 20 million Americans being covered, but half of the additional coverage was not attributable to the ACA itself, but to the expansion of the Medicaid program, a program available similar to Medicare for low-income individuals.

Major developments are occurring concerning the use of so-called "skinny" health plans.  Such plans were allowed even during the Obama Administration, but were limited to short-term plans primarily covering persons temporarily out of work.  Such skinny plans did not require compliance with the ACA and could limit coverage of those with pre-existing conditions or not cover all the range of essential health benefits required by the ACA.  As a result, the skinny plans were much cheaper for participants than other types of coverage.

Currently, there is a proposed rule which would allow sales of skinny plans for up to a year in duration, including a request for comments on allowing health insurers to continue sales of the plans for 12 months or even longer.  These type plans are very inexpensive and thus very attractive for healthy people who might otherwise have to be covered by the exchanges under the ACA.  The possible increase in availability of short-term plans and the repeal of the individual mandate penalty means that the pool of those participating in the ACA program is less likely to improve.  Studies suggest that expanding such short-term policies as proposed would increase the number of people without minimum essential coverage by 2.5 million in 2019, but it also found that if the rules on short-term plans are loosened, 1.7 million of the people buying short term policies would otherwise have been uninsured.

Another proposed rule would let small employers and some individuals combine together with associations to get non-ACA-compliant "skinny" plans.  The Obama Administration had allowed certain states to get "waivers" of ADA requirements, but the new proposals would expand those waivers.

The result in these developments is that there will be more variation in healthcare policy based on the particular state.  For example, a state like California may have a healthcare policy resulting in more affordable premiums for costly medical conditions.  In contrast, in a state like Texas, a sicker individual may do less well with premiums for costly medical conditions, but younger, healthier persons have the option of seeking less-comprehensive coverage that may cost far less. 

Another development is the expansion of states that will accept the new and higher coverage under Medicaid for low-income individuals.  In general, during the Obama Administration the federal government agreed to pick up most of these additional costs, but with the prospect of states absorbing the additional cost at some point in the future.  Some 18 states never accepted the expansion of coverage, but there is a trend for more states to accept the expanded Medicaid coverage, together with some states seeking to add work requirements to be covered.  The expansion of Medicaid is more expensive to the government, and results in fewer individuals selecting the private coverage offered by the employer or the state exchanges.

WHERE WE ARE ON DACA, REFUGEES AND IMMIGRATION REFORM

Back in September, President Trump announced that the program called "Deferred Action for Childhood Arrivals (DACA)" would end on March 5, 2018.  Subsequently, two district court judges issued injunctions blocking that plan and ordered administration officials to continue to process DACA renewals.  On February 26, 2018, the U.S. Supreme Court rejected a direct appeal of the issue and so currently DACA participants can remain in the U.S. as long as they apply for renewals when their two-year permits expire.  While President Trump had called on Congress to replace DACA with permanent Congressional protections, he also demanded a range of immigration policy changes including building the "wall," reducing family-based immigration, and eliminating the visa lottery.  DACA was created by the Obama Administration in 2012 and covers those who arrived in the U.S. under the age of 16.  Some 700,000 or more young people are currently enrolled in the program.  Attorney General Sessions considers the program an unconstitutional exercise of executive power, since it was based on the concept of prosecutional discretion or forgiving of law violations which normally only exists in individual cases rather than portions of an entire statute.

Although those current and former DACA participants will be able to request renewals of their DACA permits, applications from those who never participated in the program will not be considered under the current status of the rulings.

Congress has been unable to agree on legislative compromises and the existence of the court injunctions allowing continuation of DACA renewals has taken some of the pressure off immediate congressional relief.  Further, Democrats may prefer deferring immigration issues until after the November elections.

Meanwhile, the number of immigrants in this country is scheduled to be significantly reduced over the next year or so.  The U.S. Citizenship and Immigration Services has announced it is terminating the Temporary Protected Status Program (TPS) for foreign nationals in the U.S. from Sudan, Nicaragua, Haiti and, most recently, El Salvador.  TPS status provides foreign nationals a temporary opportunity to live and work in the U.S. because of catastrophic conditions in their home country, such as civil war, natural disasters or disease epidemics.  Ten countries are currently designated for TPS, but the four countries named above receiving TPS terminate no later than September 9, 2019.  The total of TPS recipients in the U.S. is in excess of 320,000, with the largest group being the 200,000 Salvadorians, which must leave the U.S. by September 9, 2019. 

Regarding enforcement, in October 2017, Tom Homan, acting Director of Immigration and Customs Enforcement (ICE) announced an increase of I-9 inspections/audits "by four-to-five times."  This is supposed to begin in the coming fiscal year which begins October 1, 2018.  While many refer to "raids" from ICE to begin in the coming fiscal year, these raids are more likely to be an expanded version of the "silent raids" in which ICE does audits at numerous facilities.  The latter type raids are more cost-effective to ICE and result in more facilities being inspected.  Some would argue that a "raid" occurs where the employer is not notified of the activity in advance and ICE presents a search warrant for an immediate inspection.  This type raid is much more serious than a typical audit and employers need immediate counsel on how to respond.


Wimberly, Lawson, Steckel, Schneider & Stine

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