hr laws, pitfalls, & health care reform: how they impact your business

HR Laws, Pitfalls, & Health Care Reform: How They Impact Your Business

Presented by: Joseph A. Appelbaum, President

AgendaHR Laws/Regulations & Pitfalls to Avoid

Employment Eligibility Verification Family & Medical Leave Act/Military Leave FLSA & Employee Classification ERISA Compliance – New Enforcement

FocusHealth Care Reform Under PPACA

HR Laws/Regs That Create Problems for Employers

Homeland Security Act of 2002 – Created DHS, USCIS & ICE - I-9 Compliance

Family & Medical Leave Act (FMLA) – Expanded Military Leave

Fair Labor Standards Act (FLSA) – Misclassification of Employees Extreme Focus for Regulators

Employee Retirement Income Security Act (ERISA) – Old Law/New Focus for Regulators

I-9 Compliance ALL EMPLOYERS SUBJECT Form I-9 used to verify IDENTITY & EMPLOYMENT

AUTHORIZATION Completed forms MUST be available for inspection by

DHS, DOL, DOJ, and any other federal or state agencies Accurately completed forms should be stored in a

SEPARATE I-9 file/binder (not in personnel files) for easy access

All ER staff that verify docs & complete forms must be trained

I-9 Compliance Pitfalls Incomplete forms on file – ALL sections

must be completed by employee & employer

Incorrect recording of identity & employment authorization documents

Missing I-9s Not updating forms with new

verifications when employment authorizations expire

REPEATING mistakes & not completing internal audits

I-9 Compliance Fines & Criminal PenaltiesCivil Fines and Criminal Penalties for Form I-9 Violations

Civil ViolationsFirst Offense Second Offense Third Offense

Minimum Maximum Minimum Maximum Minimum Maximum

Hiring or continuing to employ a person, or recruiting or referring for a fee, knowing that the person is not authorized to work in the United States.

$375 for each worker.

$3,200 for each worker.





Failing to comply with Form I-9 requirements.

$110 for each form.

$1,100 for each form.

$110 for each form.


$110 for each form.


Committing or participating in document fraud.

$375 for each worker.






Committing document abuse. $110 per violation.

$1,100 per violation.

$110 per violation.


$110 per violation.


Unlawful discrimination against an employment-authorized individual in hiring, firing, or recruitment or referral for a fee.

$375 per violation.






Asking an employee for money guaranteeing that the employee is authorized to work in the United States, also called an indemnity bond.

Pay $1,100 for each bond the employee paid to the employer.

Criminal Violations First Offense Second Offense Third OffenseEngaging in a pattern or practice of hiring, recruiting or referring for a fee unauthorized aliens.

Up to $3,000 for each unauthorized alien.



Up to 6 months in prison for the entire pattern or practice.



I-9 Compliance What to do…• Audit, audit, audit!!!• I-9 audit on an annual basis• Check for Form I-9 updates (www.uscis.gov – new

form just released!)• Train staff• Require new employees to provide documentation

& complete I-9 within 3 days of employment• Terminate EE immediately if not provided

http://www.uscis.gov/

FMLA – Do you have to comply? FMLA entitles eligible employees of covered

employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave

Covered Employers = employers who employ 50 or more employees in a 75 mile radius

NEW

FMLA – Expanded Military Leave Effective 3/8/2013 The DOL has revised the regulations to implement and

interpret statutory amendments to FMLA under the National Defense Authorization Act (NDAA) including:• Extended military caregiver leave• Expanded the definition of a serious injury or illness for

both current servicemembers and veterans• Expanded qualifying exigency leave to eligible employees

with family members serving in the Regular Armed Forces

FMLA Pitfalls No FMLA policies & procedures Not Training supervisors to identify FMLA-qualifying

leave Not following notice requirements Not designating leave as FMLA Not continuing health benefits during leave Wrongly terminating employees for FMLA qualifying

leave Not Returning the employee to his/her prior position

FMLA Compliance Employer Liability• Employee Lawsuits – Wrongly terminating the employee

or retaliating against an employee that requests FMLA – Can result in reinstatement of terminated employee with back-pay, lost benefits & any other compensation denied or a monetary judgment based on these factors

• Possible liability for employee costs related to seeking reimbursement under FMLA

• Complaints possible through DOL Wage & Hour Division• $100 fine for not posting required employee rights

notice at each work site

FMLA Compliance What to do…• Get training on the intricacies of FMLA• Establish FMLA policies & procedures• Train HR, payroll, and supervisory staff to

identify FMLA-eligible leave• Provide applicable notices• Designate leave as FMLA• Continue health benefits during leave• DO NOT terminate employees for FMLA

qualifying leave• Return the employee to his/her exact position

or a fully equivalent position upon return

FLSA & Employee Misclassification

Exempt vs. Non-Exempt

Employee vs. Independent Contractor

Exempt vs. Non-Exempt Pitfalls• Relying on job titles only• Inflating job titles to “make” a job exempt• Not evaluating each position individually• Assuming all “salaried” employees are exempt• Assuming all “administrative” employees are

exempt• Assuming all “supervisors” are exempt (i.e.,

shift supervisor)

Exempt vs. Non-Exempt Employer Liability• Unpaid overtime, attorneys fees, fines and

penalties that can be assessed by federal and state agencies

• Federal fines up to $10,000 or $1,000 per violation depending on the willfulness of the violation (in addition to back OT)

• Employers subject to criminal prosecution for willful violation

Exempt vs. Non-Exempt What to do…• Again….Audit on a regular basis• Have current, accurate job descriptions &

job titles• Define how you will handle OT for salaried

employees that are non-exempt (or pay them hourly)

• Evaluate EVERY position individually• Determine if a “supervisor” should actually

be exempt

Employee vs. Independent Contractor The DOL states:

Misclassified employees are often denied access to critical benefits and protections—such as family and medical leave, overtime, minimum wage and unemployment insurance—to which they are entitled. Employee misclassification also generates substantial losses to the Treasury and the Social Security and Medicare funds, as well as to state unemployment insurance and workers compensation funds.

Cross auditing between DOL & IRS Employers & workers may be subject to stiff criminal

and civil penalties and fines if the IRS determines that the employment relationship has been misclassified

Employee vs. Independent Contractor (IC)

Pitfalls• Letting the worker choose to be an IC without

evaluating true status• Hiring ICs to do the same work as other regular

employees• Controlling when, how, where, or in what way an IC

performs work• Reimbursing ICs for job-related expenses separately• Not requesting/verifying IC’s EIN, State Registration,

Licensing, etc.

Employee vs. Independent Contractor (IC) Employer Liability & Lawsuit Examples• Back wages & corresponding payroll taxes• Federal Judge Orders Firm to Pay $1.3 Million in Back Wages;

Company Misclassified Employees as Independent Contractors - Following an investigation by the DOL, Pennsylvania based kgb USA Inc. was deemed to have misclassified workers as ICs instead of employees, and subsequently failed to pay minimum wage to current and former employees in violation of the Fair Labor Standards Act.

• A recent court case highlights the risks of staffing firms placing ICs at client sites. Arise Solutions, a supplier to companies including AT&T and Apple, reportedly settled a class action lawsuit for $1.25 million having misclassified more than 200 service providers as ICs when they should have been employees.

Employee vs. Independent Contractor (IC)

What to do…• Audit current worker classifications• Develop procedures for classifying status going

forward• Follow guidance & “tests” provided by the

DOL & IRS• Obtain an IRS Determination when truly in

doubt about a particular worker or class of workers

ERISA Compliance Employee Retirement Income Security Act (ERISA) was

enacted in 1974, but many (if not most) small and medium sized employers are out of compliance with the requirements of Title I of the Act. However, compliance with Title I of ERISA is not an option – it is the law.

Until recently, the DOL only applied limited enforcement of ERISA and related regulations – primarily targeting larger organizations and organizations in which employees reported violations. This leniency is over!

ERISA Compliance Pitfalls • Lack of awareness by employers• Thinking carrier documents are compliant (i.e.,

certificates of coverage)• Confusion due to the complexity of the

regulations• Complacence due to prior limited enforcement

of the regulations• Not understanding the extensive penalties that

may result from non-compliance

ERISA Compliance Penalties • EBSA has authority under ERISA Section 502(c)(2) to

assess civil penalties for reporting violations up to $1,000 per day against plan administrators who fail or refuse to comply with annual reporting requirements• Section 502(i) gives the agency authority to assess

civil penalties against parties in interest who engage in prohibited transactions with welfare plans ranging from 5% to 100% of the amount involved in a transaction

ERISA Compliance What to do…• Have a written Plan Document(s)• Follow Plan terms strictly under fiduciary standards• Furnish Summary Plan Description(s) (SPDs) automatically

to plan participants• Furnish Summary of Material Modifications (SMMs) when

necessary• File Form 5500 annually for each plan (exception for plans

with less than 100 participants)• Furnish Summary Annual Reports• Furnish Summary of Benefits & Coverage (SBCs) as

required to all plan participants (PPACA addition)

Health Care Reform Under PPACA

The Affordable Care Act is here to stay & employers must continue to prepare

Health Care Reform Under PPACAInitial MLR Reporting (for CY2011) and Rebate issuance in AugustWomen's Preventive Services expanded (plans renewing on or after 8/1/2012)Summary of Benefits and Coverage (SBC) and 60-day advance notice of material modifications (plans renewing on or after 9/23/12)W-2 reporting of aggregate value of employer-sponsored coverage on 2012 W-2Patient Centered Outcomes Research Institute (PCORI) Fee (plans renewing on or after 11/1/2011 through 2018)

2012

FSA contributions limited to $2,500Medicare payroll tax rate increase for high income earnersNotice to inform employees of Exchange provided by employer (delayed)

2013

Employer "Play or Pay" Mandate Individual Mandate to purchase insurance or pay a penaltyFederal and State Insurance Exchanges, including Individual subsidiesGuaranteed issue: Pre-existing conditions prohibitedEssential Health Benefits (EHB) Coverage standardized for small group plansNo Annual dollar limits on Essential Health Benefits (EHB) in any plan90-day limit on Waiting PeriodsEmployer annual reporting of employee coverageAnnual Insurer industry fee for fully-insured plans through 2018Reinsurer Fees through 2016Wellness IncentivesDeductible caps of $2k for individual and $4K for family for small group plans

2014

Increased penalties on individual mandate beginExcise Tax on high cost coverage (Cadillac Tax)States have the option to open Exchanges to all employers by 2017

2015-18

Employer Mandate – “Pay or Play” Complying with the PPACA Employer Mandate is

the most significant piece of the Act for employers at this time

Compliance is required as of January 1, 2014 (or the beginning of the plan year if not on a calendar year and assuming the plan was in place prior to the end of 2012)

Analysis should start now!!

Employer Mandate – “Pay or Play” Basic questions you need to answer…• Do you have 50 or more FTEs (full time equivalent

employees)?• If yes, do you offer coverage to all full time

employees (working 30 or more hours per week)?• If yes, does the plan provide Minimum Essential

Coverage (at least 60% actuarial coverage)?• If yes, is the plan “Affordable” to all full time

employees (i.e., employee contributions for single coverage less than 9.5% of each employee’s annual income)?

Other PPACA Items of Note Notice of Exchange – Employers must provide existing

employees and new employees on their hire date information about the existence of state insurance Exchanges (Originally effective 3/1/2013 but has been delayed by the DOL; guidance to be provided by summer or fall 2013)

Nondiscrimination Requirements – Non-grandfathered fully insured group health plans must comply with IRC §105(h) rules that prohibit discrimination in favor of “highly-compensated individuals.” (Delayed indefinitely, but important to consider now)

Other PPACA Items of Note Individual Mandate – Affordable Care Act requires individuals

to maintain health insurance for themselves and their dependents (some exemptions available). Penalties for individuals will be:• 2014: $95 per adult and $47.50 per child, up to a family maximum of $285

or 1 percent of family income, whichever is greater• 2015: $325 per adult and $162.50 per child, up to a family maximum of

$975 or 2 percent of family income, whichever is greater• 2016: $695 per adult and $347.50 per child, up to a family maximum of

$2,085 or 2.5 percent of family income, whichever is greater Federal Subsidies – Subsidies available to lower-income

individuals enrolling in state-based Exchanges. Subsidy amounts depending on income, age, and family size

Other PPACA Items of Note State or Federally-Facilitated Exchanges – Every state

must establish a health insurance Exchange (or allow one to be federally facilitated)

Automatic Enrollment – Employers with 200+ employees who offer group health plans must automatically enroll all FT employees as soon as they are eligible for coverage

PPACA Next Steps for You… Define the group (individual or controlled group) Determine the number of Full Time Equivalent (FTEs)

employees now & projected for 2014 – 50+ FTEs must comply

Identify any seasonal workers, contingent workers, and/or temporary workers – seasonal workers as defined by the DOL are excluded, but depending on hours worked, contingent and temporary workers may need to be covered

Perform a qualitative analysis to determine if existing plans meet qualifying eligibility and affordability standards

PPACA Next Steps for You… Determine the true organizational costs of either offering

or not offering health coverage after 2013 (i.e., pay or play) – for many organizations, this is not the "no-brainer" that it may first appear

Verify plan waiting periods are in compliance Prepare and distribute Employer Exchange notices (pending

further guidance) Verify plans meet non-discrimination requirements

(pending further guidance)

Resources Employment Verification – www.uscis.gov FMLA - http://www.dol.gov/whd/fmla/ FLSA & Misclassification -

http://www.dol.gov/whd/flsa/ ERISA Compliance -

http://www.dol.gov/ebsa/compliance_assistance.html

PPACA – www.healthcare.gov, http://www.dol.gov/ebsa/healthreform/

http://www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919f35e66f614176543f6d1a/?vgnextoid=31b3ab0a43b5d010VgnVCM10000048f3d6a1RCRD&vgnextchannel=db029c7755cb9010VgnVCM10000045f3d6a1RCRD

http://www.dol.gov/whd/fmla/

http://www.dol.gov/whd/flsa/



http://www.healthcare.gov/

http://www.dol.gov/ebsa/healthreform/

Questions?

Thank you!Joseph AppelbaumPresidentPotomac Companies, [email protected]

mailto:[email protected]

hr laws, pitfalls, & health care reform: how they impact your business

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