Employment Law Bits

DOMA and your 401(k) or (m) safe harbor plan

How will the DOMA decision in 2013 in U.S. v. Windsor affect your 401(k) or (m) safe harbor plan? Well, the Internal Revenue Service (IRS) issued Notice 2014-37 on May 16, 2014 addressing this exact issue. In this notice, they provide the following background information:

“Notice 2014-19 provides that the deadline to adopt a plan amendment pursuant to Notice 2014-19 “is the later of (i) the otherwise applicable deadline under section 5.05 of Rev. Proc. 2007-44, or its successor, or (ii) December 31, 2014. Moreover, in the case of a governmental plan, any amendment made pursuant to this notice need not be adopted before the close of the first regular legislative session of the legislative body with the authority to amend the plan that ends after December 31, 2014.”

“Under Treasury Regulations, a 401(k) or (m) plan must be adopted before the beginning of the plan year, and must be maintained throughout a full 12-month plan year. Exceptions are granted relating to the reduction or suspension of safe harbor contributions, or in guidance of general applicability published in the Internal Revenue Bulletin.”

However, may 401(k) or (m) plans adopt a mid-year amendment pursuant to Notice 2014-19? Notice 2014-37 answers “yes.” The plan will not fail to satisfy the requirements to be a 401(k) or (m) safe harbor plan merely because the plan sponsor adopts a mid-year amendment pursuant to Notice 2014-19.

If you have any further questions regarding your 401(k) or (m) plan, please speak to an employment lawyer.

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What are the legal holidays in Massachusetts, and can you make your employees work them?

Are you legally allowed to make your employees work on a holiday? According to Massachusetts law, if an employer requires an employee to work in any mill or factory on any legal holiday, except to perform work that is absolutely necessary and can lawfully be performed on Sunday, it can lead to a fine of up to $1,500.

Retail stores and shops, however aren’t quite as strict. All stores and shops that sell goods at retail may open on Memorial Day, the Fourth of July, and Labor Day. However, they may not open on Christmas Day if it happens to fall on a Sunday.

So, the retail stores may open, but who can work? People may work on these days if their performance of labor, business, or work is directly connected to retail sales on these days. On these holidays, retail stores may sell all types of goods and foodstuffs that may lawfully be offered for sale in Massachusetts.

But what holidays are “legal holidays?” Legal holidays in Massachusetts include: January 1st, July 4th, November 11th, and Christmas Day. If any of these days occur on a Sunday, the following day shall be considered a “legal holiday.” Other legal holidays include the third Monday in January, the third Monday in February, the third Monday in April, the last Monday in May, the first Monday in September, the second Monday in October, and Thanksgiving Day.

But wait just a moment, if you work in Suffolk County, Evacuation Day on March 17th and Bunker Hill Day on June 17th (or the day following, when either fall on a Sunday) are also considered legal holidays.

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ERISA – plan administrators' conflicted duties

The Employee Retirement Income Security Act (ERISA) requires all plan fiduciaries to discharge their duties with respect to a plan solely in the interest of the participants and beneficiaries. A problem arises when what’s best for all participants is not best for a select few beneficiaries.

This situation will generally arise when the fund for a plan is in financial danger. In response, the plan fiduciaries decide to check the eligibility requirements of all those receiving pensions and cancel the benefits of those beneficiaries who were never entitled to a pension in the first place. This is a mechanism applied to help the fund stay financially afloat. It is needed so participants who are not yet entitled to a pension will one day be able to apply for one. However, the plan fiduciaries also have a duty to those already receiving pensions, and by canceling those pensions, they would not be acting in the interest of those beneficiaries.

Courts in general will be more lenient regarding plan fiduciary decisions when they are made to maintain the fund’s actuarial soundness. However, those decisions cannot be arbitrary or capricious, meaning that plan policies cannot be amended for the sole purpose of canceling beneficiary pensions. As a side note, all amended policies must be published so all participants and beneficiaries have the opportunity to protect themselves.

If you are a plan administrator and have a dilemma involving conflicted participant/beneficiary interests please contact an employment law attorney.

Healthcare and religion: The potential impact of striking down a company’s requirement to pay for employees’ contraception

The Supreme Court recently struck down an Affordable Care Act mandate requiring all closely held for-profit businesses to pay insurance coverage for their employees’ contraception. The court ruled that this mandate violated the Religious Freedom Restoration Act of 1993.

What does this mean for employers with sincere religious beliefs? Justice Ginsburg, in her dissent, made a very strong argument that this case would open a floodgate of litigation. She believes that this case will allow any commercial enterprise to opt out of any health-care related law they believe to be incompatible with their religious beliefs. Some examples include blood transfusions for Jehovah’s Witnesses, antidepressants for Scientologists, medication derived from pigs such as anesthesia for certain Muslims, Jews, and Hindus, and vaccinations for Christian Scientists.

Although it is too soon to tell, with this decision, closely-held commercial enterprises with sincere religious beliefs may be able to opt-out of certain types of government mandated healthcare coverage. For more information about this landmark decision and its implications, please contact an employment law attorney.

Image credit: Wikimedia Commons under Creative Commons license

Workers’ Compensation Act and mental and emotional injuries

Part 4*

Does the Workers’ Compensation Act (ACT) cover mental and emotional injuries?

In general, yes. First, the Act does cover physical injuries that result in a mental based incapacity as well as a trauma that is mental in nature but presents as a physical incapacity. The more challenging cases arise where the injury involves no physical harm and the resulting incapacity is due to a mental or emotional disability. In those cases it must be shown that the “predominate contributing cause” of the disability was “an event or series of events occurring with any employment.”

Can personnel decisions, like demotions or firing, which result in emotional injuries be covered under the Act?

It depends. The Act protects employers who make a “bona fide” or good faith personnel decision that results in emotional injury as long as the decision was not intended to inflict emotional harm. In addition to protecting employers from workers compensation claims, employees are also barred from bringing a civil law suit based on a bona fide personnel action. However, if the decision was not made in good faith, then the employee can receive compensation for his or her injury. 

* This is the fourth of an eight part series on the Massachusetts Workers Compensation Act. Read part 3 here.

Photo credit: TheAlieness GiselaGiardino²³  under Creative Commons license

 

 

How does personal injury figure into workers compensation insurance?

Part 3*

What injuries are covered?

The Workers’ Compensation Act (ACT) provides that an injury for which compensation can be provided is a personal injury arising out of and in the course of his employment.

What does “personal Injury” mean?

A ‘personal injury’ is broadly defined as any “lesion or change in any part of the system that produces harm or pain or a lessened facility of the natural use of any bodily activity or capability.” Any injury that decreases ones earning capacity is generally considered a personal injury.

Personal injuries do not include claims for things such as defamation, malicious prosecution, violations of civil rights, false imprisonment, or invasion of privacy. If an injury is not a personal injury, then the employee will not receive workers compensation payments, however, the employee is no longer bared from bring a suit against the employer.

Injuries may occur over a longer period of time, such as with exposure to a harmful chemical or stress-related injuries. However, the Act does not cover “wear and tear” caused by a particular type of work. Thus, while a single event is not necessary for coverage, it is necessary to point to a specific incident or series of incidents which caused the injury or that the condition is not inevitable in the particular line of work.

What does “arising out of” and “in the course of his employment” mean?

Generally this part of the definition of covered injuries is construed broadly. “Arising out of” refers to the cause of the injury – both direct duties and actives that are incidental to duties, such as breaking an ankle in the employer’s parking lot or while staying in a hotel while on a trip required by the employer. “In the course of” refers to the time, place, and circumstances surrounding the injury. One long standing rule that comes out of this is that employers are not responsible for the “comings and goings” of employees, their travel to and from work. 

 

* This is the third of an eight part series on the Massachusetts Workers Compensation Act. Read part 2 here.

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Workers compensation insurance: employer obligations

Part 2*

Who has to carry workers compensation insurance?

Over the years, mandated coverage under The Workers’ Compensation Act (ACT) has increased in Massachusetts to the point where it is compulsory for nearly all employers to carry workers compensation insurance. There are exceptions, including seasonal, causal, and part-time domestic servants, and non-profits staffed exclusively by volunteers. The default is that employers must provide coverage through an insurance company licensed for the purpose in Massachusetts; however, some companies can qualify as self-insurers.

The Act covers employees who are working in Massachusetts, even if the employee does not live in MA or the contract hiring them was made outside of the Commonwealth. It also covers all employees hired by a contract of employment that was made in Massachusetts. Generally when neither the contract for employment, nor the injury occurred in Massachusetts, the Act will not apply. However, there are exceptions.

What if an employer fails to carry workers compensation insurance?

If an employer fails to provide coverage, the employer is liable for damages through court action, and the employer will lose the ability to assert certain defenses. In addition, a stop work order may be issued, civil penalties assessed, or criminal sanctions brought.

If an employer has failed to comply by not keeping up to date with its insurance premiums, a private suit may be brought to force compliance with the law, but only after giving the employer notice and time to correct the defect. If the person bringing the suit proves a violation of the act, then they can collect 25% of the recovery or $25,000.00, whichever is less.

The cost of workers compensation insurance depends on a number of factors: the riskiness of the job, past injuries and accidents, the employer’s bargaining power, the market, and the potential financial exposure for the insurer. 

 

* This is the second of an eight part series on the Massachusetts Workers Compensation Act. Read part 1 here. Read part 3 here.

Workers compensation insurance basics

Part 1*

What is workers compensation insurance?

Workers compensation insurance is a system set up to insure that workers injured in the course of their employment have access to financial support without the need for litigation in Massachusetts. The Workers’ Compensation Act (ACT) provides recovery for personal injuries arising out of and in the course of employment. The way it works is that the injured employee gives up his or her right to sue the employer in exchange for the right to be compensated for the injury regardless of whether the employer is at fault.

How does it work?

Workers compensation is a state specific system in which employers purchase insurance. Employers must pay for the full cost of the insurance and are not allowed to require employees to pay any part of the costs. The idea is that providing for injured employees is part of the cost of business, and thus it provides an incentive for the employer to provide a safe workplace. Employees are paid for loss of earning capacity, typically weekly, for as long as the loss of earning capacity continues; however, sometimes a lump sum may be paid.

Can an employee choose to sue his employer instead of electing workers compensation insurance?

No. The Act provides an exclusive remedy, which means that for employees who suffer a personal injury during the course of employment their only remedy is through the Act, they cannot sue their employer. Therefore, the employer is immune from suit, as is a co-employee who negligently caused the injury. Additionally, injuries intentionally caused by another employee, who is furthering the employer’s interest are also covered under the Act. However, intentional injures that do not further the employers interests are not barred, such injuries arising from discrimination or harassment. 

 

* This is the first of an eight part series on the Massachusetts Workers Compensation Act. Look for subsequent posts over the next several weeks. Read part 2 here.

 

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MA employers must pay unused vacation time upon an employee’s departure

Under the Massachusetts Wage Act, when an employee is either terminated or let go from employment, an employer is required to pay that employee all wages due to him within a certain period of time. If an employer fails pay the employee in a timely manner, the employee can bring a claim against the employer under the Wage Act.

Such a claim has three parts: the employee “must prove

1. He was an employee under the statute;
   
   
2. His deferred compensation constitutes a ‘wage’ under the statute; [and]
   
   
3. The defendants violated the Act by not paying him his wages in a timely manner.” Doucot v. IDS Scheer, Inc., 734 F.Supp.2d 172, 192 (D.Mass.2010).

But wages do not simply include salary or hourly earnings. Under Massachusetts law wages also “include any holiday and vacation payment due the employee under an oral or written agreement.” Therefore, employers must compensate employees for the value of their unused holiday or vacation time when they leave their employment.

In a recent case, Dixon v. City of Malden, an employee’s contract was not renewed and a replacement for his position found. When he was told his services were no longer needed, he had fifty unpaid vacation days, which were worth over $13,000. The employer continued to pay him from March 21^st to June 29^th. When the employee filed suit against the employer for failing to compensate him for his vacation time, the employer countered saying that he had been more than fairly compensated through the continuation of his salary and benefits.

But, the Supreme Judicial Court disagreed with the employer. “Gratuitous salary payment, and the benefits associated with salary payments, do not constitute payments for earned and accrued vacation time.” Dixon v. City of Malden, 464 Mass. 446, 451-52 (2013). Furthermore, the court found that the employer was strictly liable, meaning the employer’s intent was not an issue, and the failure to pay the wages due at the time of firing results in damages being awarded to the employee.

While the court declined to assess triple damages (although triple damages are now mandatory if an employer is found to have violated the Wage Act, at the time this case was filed, such an award was at the discretion of the trial judge).

 

Photo credit: Microsoft

What the Affordable Care Act means to Massachusetts employers

Last summer the Supreme Court upheld the Patient Protection and Affordable Care Act (ACA.) While it has been a year since the opinion in National Federation of Independent Businesses v. Sebelius was handed down, employers will soon begin to see the repercussions of Justice Roberts’ plurality opinion.

The logic behind the ACA is to implement universal healthcare in the US and ensure that all Americans have access to affordable care. The ACA seeks to expand Medicaid coverage and preserve employer provided coverage. But what does this mean for employers?

Starting in 2014, “large employers” will face hefty fines and penalties for failing to provide minimum medical coverage to at least 95% of all full-time employees. A large employer is a business that employs at least 50 full-time employees. A full-time employee, for purposes of the Act, works at least 30 hours per week.

According to the Congressional Research service (CRS,) it is anticipated that employers are projected to pay over $130-billion in penalty payments over a 10-year period. However, the amount of the penalty will vary depending on what coverage the employer provides prior to the year 2014.

Penalties for Large Employers Offering Coverage

If the employer already provides health insurance prior 2014, then the coverage offered to employees must meet two criteria. The insurance offered to the employee must be affordable and it must be adequate. Coverage is deemed to be affordable if the contribution from the employee does not exceed 9.5% of his or her taxable income. Further, the plan is considered adequate if the total coverage is at least 60%. If the above criterion is not met, the employer will be subject to a penalty.

Penalties for Large Employers Not Offering Coverage

f the employer does not offer coverage, employees may be eligible for tax credits for coverage through an exchange. An exchange is a private healthcare market, which individuals may patronize. However, large employers will be subject to a penalty for every full-time employee forced to obtain coverage through an exchange. Starting in 2014, the penalty will be calculated;

(Number of full-time employees – 30 X 1/12 of $2,000)

How Should Employers Prepare?

1. Determine if you are classified as a large employer: Since penalties are assessed based on the number of full-time employees, employers who have 50 or close to 50 full-time employees should be on alert.
   
   Both full-time and part-time employees are considered for this calculation. Hours worked by part-time workers are converted into full-time employees. Thus, add up all hours worked by part-time workers in one month. Then divide the total by 120 and add that number to the total number of full-time workers. The Congressional Research Service provides a great example of this calculation:
   
   For example, consider a firm with 35 full-time employees. Assume the firm also has 20 part-time employees who all work 24 hours per week (96 hours per month). These part-time employees’ hours would be treated as equivalent to 16 full-time employees for the month, based on the following calculation: 20 employees x 96 hours / 120 = 1920 / 120 = 16. Thus, in this example, the firm would be considered a large employer, based on a total full-time employee count of 51—that is, 35 full-time employees plus 16 FTEs based on the number of part-time hours worked.
2. If you are a “large employer” make sure your coverage is compliant 
3. Inform your Employees: Under the ACA employees must receive notification of benefits and coverage. Employers must provide general information about public exchanges to all employees.

Photo credit: Microsoft