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PERSUADER RULE ON ADVICE FROM ATTORNEYS/CONSULTANTS RESCINDED

One of the most controversial proposed regulations during the Obama Administration imposed public reporting requirements on employers who obtained advice on union matters.  The proposed regulations required reporting on the type advice and the fees involved.  On July 17, 2018, the Department of Labor issued a final rule rescinding the so-called "Persuader Rule."  The rule had already been rejected by a federal judge, and so it had never taken effect.  The new rule suggests that the Obama regulation would have led to violations of the attorney-client privilege.

TRUMP'S TRAVEL BAN FROM EIGHT COUNTRIES UPHELD

On June 26, 2018, the Supreme Court upheld President Trump's travel ban imposed against eight countries, rejecting the contention that the President had exceeded his authority and violated the Constitution by targeting Muslims.  The 5-4 majority ruled that the immigration laws grant the President broad discretion to restrict the entry of aliens whenever he finds it "would be detrimental to the interest of the United States."  Trump v. Hawaii, No. 17-965. 

There is some speculation as to whether the ruling will encourage the President to take action to block employment-based immigration programs he doesn't like.  The Administration has already limited certain employment-based immigration programs, particularly the H-1B Skilled Guest Worker Program as part of its "Hire American" program.

SIGNIFICANCE OF JUDGE KAVANAUGH'S NOMINATION TO THE SUPREME COURT

Most expect Judge Kavanaugh to continue the pro-employer rulings in labor and employment matters issued by his mentor, the recently retired Justice Anthony Kennedy.  His previous rulings suggest he would uphold mandatory arbitration agreements and support pre-Obama era case precedents under the National Labor Relations Act, such as on the joint-employer issue.  An area that may particularly benefit employers is the judge's inclination to give less deference to the position of administrative agencies, which may benefit employers in defending certain administrative actions.  His prior rulings indicate that he recognizes the existence of discrimination, and Judge Kavanaugh's views on sexual orientation discrimination may be a wild card.

One area in which Judge Kavanaugh may reject the current Administration's policies is immigration.  There is currently a lot of litigation in immigration because of restrictions from the U.S. Citizenship and Immigration Services.  Judge Kavanaugh may have a tendency to read the immigration statutes literally and thus look more carefully as to whether the Executive Branch is interpreting immigration laws consistent with the statutes.  Further, he has authored a decision supporting a significant degree of prosecutorial discretion not to enforce certain laws, which may seem to be supportive of President Obama's decision not to enforce certain immigration laws under the Deferred Action for Childhood Arrivals (DACA) Program, an issue currently before the courts.  Further, Judge Kavanaugh has remarked in the past that the abortion ruling, Roe v. Wade, is settled law, and has even issued an opinion suggesting he might support the Affordable Care Act (ACA). 

In short, although Judge Kavanaugh is likely to join the conservative majority on the Court, he has also taken some positions that may be contrary to the current Administration's policies.

SMALL EMPLOYERS CAN FORM ASSOCIATION HEALTH PLANS TO LOWER COSTS

Employers, particularly small employers and working owners, have a new way to control healthcare costs as a result of a Department of Labor (DOL) rule published in the Federal Register on June 21, 2018.  President Trump in October 2017 signed an Executive Order directing the DOL to issue rules governing the formation and management of association health plans (AHPs), greatly expanding the potential use of these plans.  The new rule will allow working owners and small businesses to band together, bound by geography or industry, to create a health plan that would be allowed to function like a large single employer plan.  That is, by participating in AHPs, employees of small employers or working owners will be able to obtain coverage that is not subject to the regulatory complexity and burden that currently characterizes the market for individual and small group health coverage.  Therefore, such AHPs can enjoy flexibility with respect to benefit package designs comparable to that enjoyed by large employers.  AHPs also may help reduce the cost of health coverage to participating employer members by giving groups of employers increased bargaining power.

AHPs will not be subject to the Affordable Care Act (ACA) requirements of providing a long list of essential health benefits.  Essential health benefits that AHPs can choose not to provide include prescription drugs, rehabilitative services and devices, laboratory services, preventive and wellness services, pediatric services, oral and vision care, and others.

DOL reports that up to 11 million people who are sole proprietors or work for small employers currently lack employer-sponsored insurance.  The U.S. Congressional Budget Office predicts that 400,000 people who would have been uninsured will enroll in AHPs and 3.6 million people will enroll in AHPs who would have had other coverage, resulting in 4 million additional people enrolling in AHPs.

AHPs will remain regulated, however, by other laws, including the non-discrimination requirements of the Health Insurance Portability and Accountability Act (HIPAA).  The new rule makes clear through examples, however, that employment-based classifications such as part-time or full-time do not violate the HIPAA non-discrimination requirements and may be used in determining eligibility or setting rates.  AHPs also will remain subject to regulation under state laws governing Multiple Employer Welfare Arrangements (MEWAs) and are still subject to certain other federal mandates including coverage of mental health benefits, no lifetime or annual limits on certain benefits, and non-discrimination provisions.  States might choose to support the new regulation, or they might implement their own requirements such as benefits, reserves and structure, or even reject certain types of AHPs.  AHPs will continue to be prohibited from refusing to cover individuals with pre-existing conditions and from charging those with pre-existing conditions more in premiums.  The new rule contains a provision that participation in an AHP will not subject employers to joint employer liability under any other federal or state rule.  It also states that a business will not be considered an employer of its independent contractors merely by its participation in an AHP with its independent contractors. 

Although AHPs in some form have existed for many years, the old rules provided that an AHP had to have an overwhelming commonality of interest for their members unrelated to the provision of healthcare benefits.  Further, the old association rules could not include self-employed individuals.  The new rule only requires that any association organizing an AHP must have at least one substantial business purpose unrelated to providing health coverage.

An association can also establish a subsidiary or subgroup of its members along relevant industry or business lines to serve as the "employer" for purposes of the plans, so that the provisions of the new rule would apply to the subgroup level, including the requirement that the group be controlled by its employer members.

Some groups expressed concerns about the new AHP program, warning that such "skinny" healthcare plans would cause healthy people to leave the ACA marketplace resulting in a less healthy population in ACA plans.

DOL has established an applicability date of September 1, 2018, for fully-insured AHPs, an applicability date of January 1, 2019 for existing self-insured AHPs complying with the Department's pre-rule test, and an applicability date of April 1, 2019 for new self-insured AHPs formed pursuant to the new rule.

SUPREME COURT ADOPTS RIGHT-TO-WORK FOR STATE AND LOCAL EMPLOYEES

The long-awaited Supreme Court ruling in the Janus case arrived on June 27, 2018.   Janus v. American Federal of State, County, and Municipal Employees, et al., (No. 16-1466).  As stated by the Supreme Court, the issue was whether public employees can be forced to subsidize a union, even if they choose not to join and strongly object to the positions the union takes in collective bargaining and related activities.  The Court concludes that this arrangement violates the free speech rights of non-members by compelling them to subsidize the speech of other speakers on matters of substantial public concern.  The Court is requiring public employees be treated like federal government employees and those in the 28 states with laws prohibiting agency fees, in effect adopting the "right-to-work" concept.  The Court further rules that not only the collection of such fees is unlawful but added that employees must "affirmatively consent" to have the money deducted from their pay check.

The Court’s ruling was a 5-4 majority, with the unsurprising conservative-liberal split among the Justices.  The result was widely anticipated by both labor and management, and indeed most felt that the 40-year precedent in Abood would have been overturned several years ago had not Justice Scalia died just prior to the Supreme Court ruling.  The majority found that the main reason for the Abood ruling of "labor peace" did not justify the restriction of First Amendment rights and that the purposes of "labor peace" and avoiding "free riders" could be achieved through less restrictive means.

The ruling does not appear to have any application to the private sector.  However, it has great significance to unions and potentially to the political landscape.  Unions represent about thirty-four percent (34%) of government workers, compared with about six percent (6%) in the private sector.  One study indicates that the ruling will result in union membership among state and local government employees declining about eight percent (8%), but others say the number will be higher.  Unions have been planning for the adverse ruling for several years with strategies of how membership can be retained through voluntary participation.

The political reaction to the case was immediate.  Governors in certain "blue" states reacted on the same day as the ruling, as Governor Cuomo of New York signed an executive order aimed at protecting union membership.  Even prior to the ruling, California Governor Jerry Brown signed a law shielding government employees’ email addresses from public disclosure, with the thought of protecting them from anti-union activists.  Observers will note the irony in this legislation because employers unsuccessfully made a similar argument in opposing the email address portion of the NLRB quickie election rule.  The California legislation also requires state and local government employers to allow union representatives access to new employee orientation sessions, with the goal of securing "voluntary" check-off dues authorizations. 

The Janus case itself arose in Illinois, and Republican Governor Bruce Rauner actually initiated the litigation.  Governor Rauner announced that Illinois would immediately stop collecting the union agency fees from employees’ paychecks.   The Mackinac Center for Public Policy has launched a "My Pay, My Say" website to inform public employees of their rights under the Supreme Court decision.  The website offers an automated system for workers to generate letters to their unions opting out of paying union fees.  The website is mypaymysay.com.

As to the effect on the political scene, union dues have been a substantial source of funding for the Democratic Party for many years.  In a study published by the National Bureau of Economic Research, it was found that "right-to-work" laws reduced the Democratic Party’s share of a state’s Presidential vote by 3.5%.

Subsequent cases will have to develop what it means for employees to "affirmatively consent" to have union dues deducted from their pay checks.  In the private sector, for example, even in right-to-work states, employees are generally required to pay union dues if they have signed dues check-off authorizations, which usually are only revocable during a brief window period each year of around ten (10) days.  Whether this type of limitation on withdrawing from supporting the union will be found constitutional under the Janus ruling remains to be seen.  The right-to-work groups will undoubtedly argue that employees should have the right to stop union dues at any time the employee withdraws his union membership.


Wimberly, Lawson, Steckel, Schneider & Stine

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