Murtha Means More

Labor and Employment News

February 26, 2014

LEGAL ALERT: FINAL REGULATIONS ISSUED ON EMPLOYER SHARED RESPONSIBILITY RULES 

Coverage mandate for Employers with 50-99 Employees Delayed; Only 70% of Full time Employees Must be Covered for now

On February 10, 2014, the IRS issued much-awaited final regulations on the employer shared responsibility provisions of the Affordable Care Act (ACA).  These provisions govern the penalties that may be imposed on applicable large employers (ALEs) that do not offer compliant health coverage to their employees.  An ALE under ACA is an employer who employs more than 50 full time equivalent employees (FTEs) during the preceding calendar year.  The final regulations apply for periods after December 31, 2014, and employers will be required to file a notice with the IRS on their compliance program.  Notably, the requirements of the final regulations will not apply for medium-sized employers, who employ 50-99 FTEs, until 2016.  Certain other transition relief is also available for all ALEs under the final regulations.  For example, for 2015 plan years, ALEs need only offer health coverage to 70% of full time employees to comply with the final regulations, rather than to 95% as will be required starting in 2016. 

Action Steps:  While penalties have been delayed for yet another year, employers should still make sure that they cover the appropriate employees with the correct coverage.  Especially in seasonal industries or those with many part-time employees, coverage issues can be complicated.

For more information on how ACA and the employer shared responsibility rules will affect your company, please contact Rachel Faye Smith at 617.457.4023, rfsmith@murthalaw.com or William J. Keenan, Jr. at 860.240.6028, wkeenan@murthalaw.com.

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IRS ISSUES NEW GUIDANCE ON IN-PLAN ROTH ROLLOVERS

While we have spent a lot of time over the past several years discussing the requirements of the Affordable Care Act, changes and new guidance impact many aspects of employee benefit plans.  On December 11, 2013, the IRS issued Notice 2013-74 answering many outstanding questions on in-plan Roth rollovers, often called “in-plan Roth conversions.” 

Does this impact my plan?
The Notice affects Plan sponsors and third party administrators of qualified retirement plans that currently accept Roth contributions, permit in-plan Roth rollovers, or that may be interested in permitting Roth contributions or in-plan Roth rollovers.  Although plans do not have to provide for Roth contributions or in-plan Roth rollovers, the inclusion of such provisions can make a plan more attractive to plan participants.

Background
Roth contributions to a qualified retirement plan are contributions that may be designated by a participant as taxable upon contribution, and which are then eligible to be distributed from a plan tax-free.  If the distribution meets certain requirements for a qualified distribution, earnings on the Roth contributions are also distributed tax-free.  Roth contributions must be maintained by the plan sponsor in a separate Roth account.  Notice 2013-74 provides guidance on converting non-Roth account balances to Roth account balances in 401(k), 403(b), and governmental 457(b) plans.

Previously, non-Roth balances could be rolled over to Roth accounts within the plan if the plan allowed Roth contributions and if the non-Roth account balances were both vested and eligible for distribution under the plan.  Early in 2013, subsequent legislation permitted Roth rollovers of vested amounts that were not distributable under the plan, but left certain questions unanswered.

What changed?
Under Notice 2013-74, vested amounts that do not yet satisfy the conditions for plan distribution may still be rolled-over into a Roth account in an in-plan Roth rollover.  For example, a participant would not have to satisfy the hardship or age 59 ½ distribution requirements under certain 401(k) plans to be able to roll non-Roth balances over into a Roth account in an in-plan Roth rollover.  The Notice clarifies that elective deferrals in 401(k) and 403(b) plans, matching contributions and nonelective contributions, and annual deferrals under governmental 457(b) plans are eligible for in-plan Roth rollover.  However, plan sponsors can restrict the type of contributions that are eligible for this treatment.  For example it could be limited to pre-tax 401(k) deferrals only.  Significantly, the guidance provides that any such rolled-over amounts would remain subject to the same distribution restrictions that applied previously to those amounts.  The Notice also made other helpful clarifications.

When does the change take effect?
401(k) plans generally can be amended at any time to permit in-plan Roth rollovers and to accept Roth deferrals and contributions.  Typically the IRS requires such an amendment to be made by the last day of the plan year in which the feature is added, however the Notice has extended this deadline until the last day of the first plan year in which the amendment is effective or December 31, 2014, whichever is later.  Certain other timing rules may apply to 403(b) and governmental 457(b) plans, and to safe-harbor 401(k) plans.

Action Steps:  If you offer Roth accounts, you must be familiar with these new rollover rules and make sure that your plan complies.

If you have questions about your plan’s Roth account options, are interested in adding a Roth contribution or in-plan Roth rollover feature, or have any other questions about the issues addressed here, please contact Rachel Faye Smith at rfsmith@murthalaw.com, 617. 457.4023 or William J. Keenan, Jr. at wkeenan@murthalaw.com, 860.240.6028.

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ELECTRONIC MONITORING TRAPS

With iPhones, tablets, computers and surveillance cameras everywhere, it is hard to imagine a place where you are not being watched.  However, employers must remember that Connecticut and Federal law provide rules for when they can electronically monitor their employees at work.  Failure to comply with the law can result in stiff fines.

Connecticut law generally allows employers to monitor their employees’ activities and communications electronically, whether it be by computer, telephone, camera, or radio.  However, before an employer may do so, it must post a written notice in a conspicuous place that is available for viewing by all employees disclosing what types of monitoring may occur.  We recommend that such a notice also be placed in an employee handbook.  Employers should also put employees on notice that their desks, lockers, bags, etc. at work may be inspected at any time.

The notice requirement does not apply when an employer has reasonable grounds to believe that: (1) an employee is engaged in conduct which violates the law, the legal rights of the employer or other employees, or (2) creates a hostile work environment and that electronic monitoring may provide evidence of this misconduct.

Even with the requisite notice, Connecticut law prohibits any electronic surveillance of activities of employees in areas designated for their health or personal comfort and the safeguarding of their possessions, such as locker rooms, rest rooms or lounges.

Federal law also applies in this area.  The Electronic Communications Privacy Act of 1986 ("ECPA") - which includes the "Wiretap Act" and the Stored Communications Act ("SCA") - protects the privacy of electronic communications. These laws prohibit the interception of electronic communications and unauthorized access to stored communications. A violation of these laws is punishable by fines or imprisonment. 

These laws do not prohibit an employer’s electronic monitoring of its employees if the employer meets certain conditions. For example, an employer may intercept communications if the employee consents to the monitoring, and may access the communications if the employer is the provider of the electronic communications service.

Action Steps:  All employers should issue an electronic communications policy that notifies employees that their electronic communications are for business use only, may be monitored without prior notice, and that employees should not use the systems for any personal communications which they consider to be private. This notice can be combined with the Connecticut notice.  All employers, Connecticut and elsewhere, should make sure their policies comply with federal law.

Employers with union employees should consider whether they have any duty to bargain before installing or operating a surveillance system affecting those employees.  Moreover, employers cannot intentionally overhear or record a conversation pertaining to employment contract negotiations unless all parties have consented.

Please contact Lissa Paris at lparis@murthalaw.com, 860.240.6032 or Hugh Murray at hmurray@murthalaw.com, 860.240.6077 to get more information.

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"AMBUSH ELECTION RULES" ARE BACK - TAKE STEPS NOW TO BE PREPARED

Last week the National Labor Relations Board ("NLRB") revived a regulatory proposal designed to make it easier for Unions to organize workers.  The proposed regulations do not differ from the amendments the Board tried to adopt in 2011, but which a federal court blocked for procedural reasons.

Under the proposed amendments, once a petition for an election of a union to represent employees is filed with the NLRB, the process would proceed extremely quickly.  The proposed changes set hearings for seven days after service of the notice of hearing; require that employee email addresses and phone numbers (if available) be included on voter lists supplied by the employer to the union; and reduce the time for filing the voter lists from seven to two work days.

The proposed changes would also put off litigation over the eligibility of certain voters that involve less than 20% of the bargaining unit until after the election; require the parties to state their positions no later than the start of the pre-election hearing; eliminate pre-election appeals to the Board, and consolidate such appeals with appeals of issues concerning the conduct of the election into a single post-election appeal procedure.  They would also end the practice of delaying elections to permit time for pre-election appeals; and give the Board discretion whether to hear and decide election appeals.

The result of these changes, if adopted, would be that employers faced with a petition for a union election would have to act immediately.  Because there will be essentially no time for an employer to evaluate these issues after a petition is filed, employers should take time now to determine how they would respond to a petition and to set up a detailed process to be followed in the event a petition is filed.

Action Steps:  Employers should review policies related to organizational issues, they should clearly identify which employees are supervisors under the National Labor Relations Act and figure out which employees would form an appropriate bargaining unit and which would not.  Employers should also identify individuals (and provide contact information) who have responsibilities in the event of an organizing campaign.

Please contact Hugh Murray at hmurray@murthalaw.com, 860.240.6077 or Michael Harrington at mharrington@murthalaw.com
860.240.6049 to get more information.

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CONFIDENTIALITY OF WORKPLACE INVESTIGATIONS

While employers should keep workplace investigations (including those involving sexual, racial or other types of harassment) as confidential as possible, the National Labor Relations Board ("NLRB") restricts all employers’ activities (including those in non-union workplaces).  Rather than a blanket prohibition on any communications about the investigation, the employer must show that it has a “legitimate and substantial business justification” to require confidentiality.  Employers should justify its decision to require confidentiality separately for each individual investigation.  The NLRB offered examples of what could trigger the need for confidentiality: 1) witnesses needed protection; 2) evidence was in danger of being destroyed, 3) testimony might be fabricated, or 4) there was a need to prevent a cover-up.

Action Steps:  Employers should:

  • Revise policies or codes of conduct to remove any blanket restrictions on employees discussing internal investigations;
  • Use qualifying language, and state that a need for confidentiality will be determined on a case-by-case basis;
  • For each investigation, state the reasons that justify confidentiality;
  • Document the decision process carefully.

Finally, if you do require confidentiality, be clear to limit the request both in time (only until the investigation is complete) and in scope (only the interview conducted, and the existence of the investigation).

Please contact Lissa Paris at lparis@murthalaw.com, 860.240.6032 or Michael Harrington at mharrington@murthalaw.com, 860.240.6049 to get more information.

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DONNING AND DOFFING—AN EMPLOYER VICTORY

The United States Supreme Court just came down on the side of management and held that the time workers spent donning and doffing certain protective gear did not have to be paid under the Fair Labor Standards Act (FLSA).  Some past and present employees sued United States Steel Corp. (“US Steel”) seeking back pay for the time they spent before and after work putting on and taking off, or donning and doffing, protective gear required to do their jobs.  US Steel argued that donning and doffing the protective gear fell under the exclusion contained in the Fair Labor Standards Act stating that changing clothes can be bargained for as noncompensable time.

The Court had to decide how to interpret the term “changing clothes” to determine if the time the US Steel workers put on and took off their protective gear fell under the exclusion and was noncompensable.  It looked at that section of the law which “allows parties to decide, as part of a collective-bargaining agreement, that ‘time spent in changing clothes . . . at the beginning or end of each workday’ is noncompensable.”  That provision “provides that the compensability of time spent changing clothes or washing is a subject appropriately committed to collective bargaining.”

The Supreme Court held that “clothes” are “items that are both designed and used to cover the body and are commonly regarded as articles of dress.”  The particular protective gear items that the workers argued were not clothing were: a flame retardant jacket, pair of pants, and hood; a hardhat; a snood; wristlets; work gloves; leggings; metatarsal boots; safety glasses; earplugs; and a respirator.  Based on the definition of “clothes” the Supreme Court used, it found no reason to exclude protective gear, generally, from that definition.  The Court stated that this definition of clothes “leaves room for distinguishing between clothes and wearable items that are not clothes, such as some equipment and devices.”  Some wearable items will not be captured by this exclusion. 

The Supreme Court then defined the term “changing” as “altering dress” rather than as substituting clothing.  Substitution means exchanging clothing while altering includes placing clothing over other clothing. 

Ultimately the Court held that since most of the time the workers spent involved changing clothes, and that putting on safety gear only took a few seconds, the entire period qualified for the exclusion from compensation.

Action Steps:  Employers must look at the total time an employee is putting on or taking off wearable items for work.  If the majority of time is spent putting on non-clothes items, then it is compensable time.  If the majority of the time is spent putting on clothing, as defined in this case, then it qualifies as non-compensable time.

Please contact Hugh Murray at hmurray@murthalaw.com, 860.240.6077 or Michael Harrington at mharrington@murthalaw.com
860.240.6049 to get more information.

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OFCCP NEW REGULATIONS—NEW RULES FOR EMPLOYMENT OF VETERANS AND PERSONS WITH DISABILITIES

The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) announced Final Rules that change the regulations implementing both the Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”) and Section 503 of the Rehabilitation Act of 1973.  Both of these Final Rules become effective on March 24, 2014.  VEVRAA and Section 503 only apply to federal contractors and subcontractors.  VEVRAA prohibits these federal contractors and subcontractors from discriminating against veterans and provides affirmative steps these contractors must take to increase employment opportunities for these veterans.  Section 503 prohibits these contractors and subcontractors from discriminating against individuals with disabilities and provides steps these contractors and subcontractors must take to ensure these individuals have equal employment opportunities as others.  The Final Rules strengthen the regulations under each law in an effort to provide better job opportunities to groups that suffer from higher than average unemployment rates.

The most significant changes to the regulations for each law are described below.

VEVRAA
Federal contractors and subcontractors must establish hiring benchmarks for protected veterans.  Contractors may either establish a benchmark equal to the percentage of veterans in the national workforce or use certain data published by the OFCCP along with unique work factors to establish a benchmark. 

Employers must collect quantitative data regarding the number of veterans applying for jobs and hired for jobs.  This will allow contractors to assess their outreach and recruitment efforts. 

Contractors must now make job listings available to the appropriate state and/or local employment agencies.  These job listings must be formatted in accordance with the state agency’s request so it can make the job listings available to job seekers.

Federal contractors must include certain equal opportunity language in their contracts with subcontractors to ensure that the subcontractors are aware of their duties as federal contractors.

The contractors must invite applicants to self-identify as protected veterans at both the pre-offer and post-offer stages.

Contractors must allow OFCCP to review their records in order to monitor compliance with these regulations either on-site or off-site per OFCCP’s request.

Action Steps:  Federal Contractors must make sure that their record keeping tracks veteran applications and hiring; and that their contracts with subcontractors include EEO language.  Job advertisements must be properly formatted for state agencies.

Section 503--Persons with Disabilities - New Benchmarks
Section 503 of the Rehabilitation Act protects individuals with disabilities who work for federal contractors. The law aims to provide these individuals with increased job opportunities in an effort to curb their high unemployment rates. We highlight the most important regulatory changes below.

The regulations establish a utilization goal of 7% for qualified individuals with disabilities. Although federal contractors will not be penalized if they do not meet this goal, they will need to assess their utilization each year to determine how to increase the utilization rate.

The contractors must invite individuals to self-identify as individuals with disabilities at both the pre-offer and post-offer stages of employment. Additionally, they must invite their employees to self-identify as individuals with disabilities every five years using language prescribed by the OFCCP.

Contractors must compile data regarding the number of individuals who applied for jobs and who were ultimately hired. Collecting this data will help contractors assess their outreach and recruitment efforts.

The contractors must include mandated equal opportunity language into their contracts with subcontractors to alert the subcontractors to their responsibilities as federal contractors.

The contractors must allow the OFCCP to come review their records in an effort to monitor compliance with the new regulations either on-site or off-site per OFCCP’s request.

Finally, the regulations now contain a new definition of “disability” and other necessary changes were made to the nondiscrimination provisions of the regulations in order to bring them into compliance with the Americans with Disabilities Act.

Action Steps:  Federal contractors should carefully review the rules as they add recordkeeping and notice requirements.

Please contact Susan Baronoff at sbaronoff@murthalaw.com, 617.457.4031 or Lissa Paris at lparis@murthalaw.com, 860.240.6032 to get more information.

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