Employment Matters Blog

New York Issues Proposed Regulations to Wage Deduction Law

Martha Zackin — Wed, 15 May 2013 09:56:36 -0500

New York State Department of Labor has released proposed regulations under its recently enacted Wage Deduction Law. The Law, which went into effect in November 2012, permits employers to deduct certain amounts from employees’ wages, including deductions to recover wage overpayments, for repayments of employer loans, and to provide for the payment of items such as gym memberships, parking or mass transit passes and day care, among many other items. The proposed regulations, accessible here, focus on authorized deductions for the benefit of the employee and deductions for advances and overpayments.

New York City Passes Earned Sick Time Act; Expects to Override Mayor Bloomberg's Threatened Veto Yet Again

Martha Zackin — Wed, 15 May 2013 09:50:32 -0500

By Michael S. Arnold

As expected, the New York City Council has passed the Earned Sick Time Act, which, if enacted, will require most City employers to provide job-protected sick leave, whether paid or unpaid, to the more than 1.6 million employees who currently do not receive this benefit. As with the recently-passed unemployment discrimination law, the Earned Sick Time Act passed with an overwhelming majority and we expect the Council to override any Mayoral veto.

Enactment of the law is tied to something called the New York City Coincident Economic Index, which tracks economic activity across New York City on a monthly basis. If economic conditions do not deteriorate significantly between now and December 16, 2013 – meaning that if the Index is at or above its January 2012 level on December 16, 2013 – then the law will go into effect on that date. Given that the Index has increased steadily over the last year, commentators consider it unlikely to reverse course by December.

The law affects businesses depending on their size. Employers with 20 or more employees must begin providing paid sick time on April 1, 2014. Employers with more than 15 employees but less than 20 employees must begin providing paid sick time on October 1, 2015. Those employers not required to provide paid sick time must still provide unpaid sick beginning on April 1, 2014.

The full text of the Act is available here, but highlights include:

Employees earn 1 hour of sick leave for every 30 hours worked up to a maximum of 40 hours of sick leave accrued per year.
Employers that already provide at least 5 days of any kind of paid time off (i.e., personal days, vacation and, obviously, sick leave) would not be required to provide any additional sick time, either paid or unpaid, under the law.
Employees can carry over accrued sick time to the following calendar year, subject to the 40-hour cap. In the alternative, an employer may pay its employees for any accrued but unused sick time at the end of a calendar year.
There is no requirement to pay out accrued but unused sick time upon termination.
Employees can use sick time to care for their own illness or medical condition or that of a family member, among other things.
Employers cannot retaliate against employees for using or attempting to use sick time or for complaining about a violation of the law.
Employers will be tasked with certain notification and recordkeeping obligations, including providing employees with notice of their rights under the law in multiple languages.
Employees cannot assert a private right of action to remedy violations; rather, they must go through the Department of Consumer Affairs.

We will revisit this law, including its various notice and recordkeeping requirements, as the implementation deadline nears.

Five Years in the Making - IRS Releases Findings from Colleges and Universities Compliance Project

Martha Zackin — Mon, 13 May 2013 09:25:58 -0500

By Tyrone P. Thomas

The IRS announced it is nearing completion of a five year long compliance project involving tax-exempt colleges and universities. The project, which began with questionnaires to 400 randomly-selected institutions, focused on reporting of executive compensation and unrelated business income. The IRS’s findings provide warning to all non-profit colleges and universities regarding their process to establish and report executive compensation.

In its analysis of executive compensation, the IRS found most universities attempted to avail themselves of the “safe harbor” to Section 4958 of the tax code. Section 4958 provides for certain intermediate sanctions on tax-exempt institutions when revocation of tax-exempt status is not an appropriate remedy. Under the safe harbor, a presumption of reasonableness is given to compensation decisions if:

The decision came from the review and consideration of an authorized body of the institution, whose members were free of any conflict of interest;
Appropriate comparability data was relied upon in the decision; and
The compensation-setting process is documented contemporaneously.

Unfortunately for numerous schools, the IRS found their attempts to use the safe harbor deficient. The IRS concluded the safe harbor should not apply for 20% of the reporting institutions because of issues with their comparability data. Common problems included use of schools that were not similarly situated, failure to document the selection criteria of comparable universities and use of compensation surveys with incomplete disclosure of information.

As a direct outcome of the IRS compliance project, 34 colleges and universities were selected for examination. One-third of these institutions were further reviewed for employment tax returns. Each of the completed audits resulted in an adjustment of wages leading to tax assessment and, in some cases, penalties. To date, the wage adjustments arising from the project total approximately $36 million and the additional taxes and penalties total $7 million.

The higher education community will face more sophisticated and targeted review of compensation reporting of their senior leadership and well-paid coaches as the IRS sharpens its toolkit with the lessons learned from the compliance project. In addition to Section 4958 compliance, universities must be alert to the tax treatment accorded certain types of compensation and benefits. The IRS report cites several areas as cause for wage adjustments, including failure to recognize personal use of certain perquisites as income (such as cars, housing, travel and social clubs), misclassification of employees as independent contractors, failure to withhold taxes for wages of non-resident aliens, and failure to include income from the value of certain tuition waivers and reimbursements.

All non-profit educational institutions should have their executive compensation philosophy and reporting process evaluated in light of the report’s findings. Failure to address the deficiencies noted by the IRS could result in penalties to the board members who authorized the compensation package, as well as senior administrators or athletics personnel paid such funds.

EEOC Signals Increased Focus on Employer-Sponsored Wellness Programs

Martha Zackin — Wed, 08 May 2013 15:33:20 -0500

By Martha J. Zackin

A majority of US employers offer some sort of wellness program designed to reduce the cost of health insurance and healthcare costs, and to improve the health and well-being of employees. However, unless care is taken, even well-intentioned wellness programs may violate federal law.

The EEOC held a public meeting on May 8 to discuss the interplay of employer-sponsored wellness programs and federal anti-discrimination laws. Invited panelists discussed the various ways in which wellness programs could violate the Americans with Disabilities Act, the Genetic Information Nondiscrimination Act, the Health Information Portability and Accountability Act, and the Affordable Care Act. For example, according to a description of the meeting set forth in an EEOC-issued press release, wellness programs and anti-discrimination laws intersect – and sometimes clash – when the programs require medical exams or ask disability-related questions, both of which would ordinarily give rise to a violation of the ADA, GINA, or both.

Panelists asked the EEOC for guidance, to facilitate employer compliance and to clarify the relationship between wellness programs and federal laws. Clarification in the form of published guidance is likely to be forthcoming. It is also possible that the EEOC intends to take a closer look at the design and implementation of wellness programs through targeted enforcement actions. We will keep you posted.

D.C. Circuit Strikes Down NLRB Notice Rule

Martha Zackin — Tue, 07 May 2013 14:49:07 -0500

By Martha J. Zackin

Today, the U.S. Court Court for the D.C. Circuit struck down a rule proposed by the NLRB that required employers to post workplace notices describing employees' rights to form a union or face a possible unfair labor practice charge. You can read the decision, National Association of Manufacturers v. NLRB, or click here for a summary of the decision posted at Workplace Prof Blog. Click here for links to our earlier posts on this topic.

Staffing Industry Compliance with the Employer Shared Responsibility (aka "Pay-or-Play") Provisions of the Affordable Care Act: Five Questions

Martha Zackin — Thu, 02 May 2013 13:12:35 -0500

Under the Patient Protection and Affordable Care Act (the “Act”), the federal government, state governments, insurers, employers, and individuals all share responsibility to make affordable health insurance coverage widely available. The rules that apply to employers — referred to as the “employer shared responsibility” rules — build on the existing private employer-based health insurance system. The employer shared responsibility rules apply to “applicable large employers,” which include employers with 50 or more full-time and full-time equivalent employees. The vast majority of staffing firms fit this description.

For a high-level analysis of how the Act impacts staffing firms, click here to read an advisory written by my colleague, Alden Bianchi, and Ed Lenz, Senior Counsel to the American Staffing Association.

Webinar on Whistleblower Prevention Programs

Martha Zackin — Thu, 02 May 2013 13:07:50 -0500

Mintz Levin's Health Law practice hosts periodic webinars, focusing on various health care-related topics of interest. Our next webinar, which will be of interest to readers of this blog, will focus on strategies for minimizing the risk of being subject to whistleblower actions. Attorneys from our Health Care Enforcement Defense,Class Action, and Employment, Labor & Benefits practices will discuss how to establish an effective qui tam avoidance program. Preventing Whistleblower Actions: Customizing an Effective Qui Tam Avoidance Program will be held on May 22nd from noon to 1:00 pm EST. Click here to register. We hope you can join us!

OSHA Announces Initiative For the Protection of Temporary Workers

Martha Zackin — Wed, 01 May 2013 09:47:47 -0500

By Martha J. Zackin

On April 29, the U.S. Department of Labor's Occupational Safety and Health Administration announced an initiative to protect temporary employees from workplace hazards. The initiative, announced through a press release and a memorandum sent to all of OSHA’s regional administrators, directs field inspectors to assess whether employers who use temporary workers are complying with their responsibilities under the OSH Act.

Inspectors will use a newly created code in their information system to denote when temporary workers are exposed to safety and health violations. Additionally, they will assess whether temporary workers received required training in a language and vocabulary they could understand.

The initiative follows on the heels of a spike in reports of temporary workers suffering fatal injuries on the job. In many cases, OSHA reports, the employer failed to provide safety training or, if some instruction was given, it inadequately addressed the hazard, and this failure contributed to their death.

OSHA field inspectors are now directed to determine within the scope of their inspections whether any employees are temporary workers and whether any of the identified temporary employees are exposed to a violative condition. In addition, inspectors are directed to assess – using both records review and interviews – whether those workers have received required training in a language and vocabulary they understand. A new OIS code has been established to identify temporary workers. In addition, field inspectors are directed to identify the workers’ staffing company, the company’s location, and the supervising structure under which the temporary workers are reporting (i.e., the extent to which the temporary workers are being supervised on a day-to-day basis either by the staffing client or the staffing agency).

OSHA has also begun working with the American Staffing Association and employers that use staffing agencies, to promote best practices ensuring that temporary workers are protected from job hazards.

Both staffing firms and companies that use temporary workers are required to provide safe workplaces, as well as necessary safety and health training regarding workplace hazards. Although allocation of safety-related duties and responsibilities should be clearly spelled out in contracts between staffing firms and client companies, both entities may be held liable by OSHA and the courts. Please consult your employment counsel and OSHA consultants for further information and assistance.

Court Closes Workers Compensation Loophole for Staffing Companies

Martha Zackin — Tue, 30 Apr 2013 11:45:28 -0500

A recent Massachusetts court decision upheld efforts by staffing companies and workers compensation insurers to close a loophole that allowed staffing-firm employees injured at a client company both to collect workers compensation benefits and to sue the company where they were hurt. Please click here to read a blog entry I wrote for the AIM (Associated Industries of Massachusetts) Business Insider blog.

EEOC Holds Both Staffing Firms and Staffing Clients Responsible Under EEO Laws

Martha Zackin — Thu, 25 Apr 2013 10:01:41 -0500

By Martha J. Zackin

Recently, the EEOC filed a lawsuit against Hire Dynamics, a staffing firm (click here for the EEOC press release). According to the complaint, after a Hire Dynamics employee filed a charge of discrimination against one of its clients, the staffing firm retaliated by failing to give the employee any further job assignments or opportunities. As this case highlights, it is important that staffing companies and their clients work together to comply with applicable fair employment practice laws.

Staffing is a vibrant and growing industry, employing more than 2 million workers per day. Effective use of temporary labor helps the 90% of U.S. companies that use staffing agencies to ramp up and down, as production needs fluctuate, without incurring the costs associated with managing employment processes.

Staffing agencies lease employees to their clients to perform work that is part of the routine operations of the client’s business, typically side-by-side with and doing the same work as the client’s employees. Notwithstanding the interrelatedness of staffing agencies’ and clients’ workforces, it is common for client companies to assume that they have no EEO obligations towards staffing firm employees assigned to their work site. It is also common for staffing firms to assume that they are not responsible for any discrimination, retaliation or harassment that their employees face at their clients' work sites. Both assumptions are often wrong.

According to EEOC guidance and applicable case law, staffing agencies are responsible for discrimination, retaliation, and harassment that their employees confront at clients’ work sites. Further, to the extent that the working conditions of staffing firms’ employees are controlled in whole or in part by the clients to whom the employees are assigned, clients are responsible, too. As the EEOC guidance makes clear, staffing firms must hire and make job assignments in a non-discriminatory manner and client companies must treat staffing firm workers assigned to them in a non-discriminatory manner. Further, staffing firms must take immediate and appropriate corrective action if it learns that a client has discriminated against one of its workers.

The nature of the staffing firm/client company relationship makes dealing with EEO issues and employment laws even more difficult than is typically the case. When in doubt about how to handle a particular situation, consult your employment counsel.