Employment Law Alert : Gibbons P.C.: Labor Relations, Employment Contracts, Employee Benefits, & Wrongful Discharge Lawyers & Attorneys

Employers are reminded that the Federal Department of Labor (“DOL”) has issued new model COBRA election notices for single employer health plans aligned with Patient Protection Affordability Care Act (“PPACA”) requirements. Under COBRA (the Consolidated Omnibus Budget Reconciliation Act), employees who experience a qualifying event, such as a loss of employment, are able to continue coverage under the employer’s group health plan for themselves and qualified beneficiaries by paying the COBRA premium. The new model notices are available on the DOL website in both English and Spanish.

The major changes reflected in the new notices include the options to purchase coverage through the federal exchanges called the Marketplace and the elimination of pre-existing condition limitations, which are prohibited under PPACA starting January 1, 2014 for adults. There has been no change to an employer’s obligation to notify the plan administrator within 30 days after the qualifying event and the plan administrator’s subsequent obligation to send the notice to the employee and qualifying beneficiaries within 14 days of the qualifying event. Nor has there been a change to the requirement that an employee who is eligible for health benefits continuation through COBRA elect coverage within 60 days of receiving the notice.

For more information regarding COBRA compliance, including the COBRA notice, please contact an attorney in the Gibbons Employment & Labor Law Department.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

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In US Airways, Inc. v .McCutchen, decided on April 16, 2013, the U.S. Supreme Court once again emphasized that in disputes involving employee benefits plans governed by the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. (“ERISA"), it is the unambiguous language of the plan in question that controls the rights of the parties and that general equitable principles cannot be used to supersede the terms of the plan. In areas where the plan is silent, however, courts may employ appropriate equitable principles to construe the plan. At issue in US Airways was the reimbursement provision of an employer’s health benefits plan that purported to give the employer the right to recoup medical benefits paid to an employee injured in an automobile accident who thereafter recovered funds from third parties as a result of the accident, although the amount the employee actually recovered after paying his attorney was less than the amount he owed his employer. The Supreme Court rejected the employee’s attempt to apply equitable principles of unjust enrichment to limit the application of the reimbursement provision. Holding, however, that the plan was silent as to the allocation of the costs, including attorneys fees, incurred by the employee in his efforts to recover from third parties, the Court further held the equitable principle known as “the common fund rule” should apply, entitling the employee to reasonable attorneys fees from the funds recovered. The decision makes clear the importance to employers of accomplishing the objectives of their benefits plans with clear-cut language.

Background

After McCutcheon was seriously injured in an automobile accident, his medical bills, amounting to almost $67,000, were paid by the health plan of his employer, US Airways (“the Plan”). McCutchen sued the driver of the other car involved, claiming $1 million in damages. Unfortunately, the driver of the other car had insufficient insurance. Through the efforts of McCutchen’s attorney, working under a 40 percent contingency fee arrangement, McCutcheon was able to recover only a total of $10,000 from the driver of the other car and $100,000 from his own insurance company. This left him with a net recovery of $66,000 after paying his attorney, since US Airways did not contribute anything towards his attorneys fees.

US Airways, as Plan administrator, then brought suit in federal district court, seeking equitable relief under § 502(a)(3) of ERISA to recover from McCutchen the $67,000 in medical bills it had paid on his behalf, relying on the following Plan provision:

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Earlier this month, a new bill, A3970, was introduced in the New Jersey State Assembly by Assemblymen Peter J. Barnes, III, Joseph V. Egan, and Wayne P. Deangelo limiting the enforcement of certain provisions in employment contracts if the individual is eligible for unemployment compensation. It is unclear if the bill will ultimately pass, and be signed into law by the Governor, but there appears to be support within the state Assembly and Senate. The bill provides that if an unemployed individual is found to be eligible to receive unemployment compensation benefits, that individual shall not be bound by any covenant, contract, or agreement not to compete, not to disclose, or not to solicit. The bill only applies to agreements entered into AFTER the date of enactment.

Given the uncertainty raised by this very broad bill, employers are urged to enter into these types of agreements for all important employees with access to confidential information as soon as possible. In addition, assuming the bill passes, it will be important to provide for some type of garden leave or attempt to structure severance payment over time, so that the former employee may not be deemed eligible for unemployment during the term of the non-compete/non solicitation.

We will continue to monitor the bill and provide any updates as they become available.

Christine A. Amalfe chairs the Gibbons Employment & Labor Law Department.

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In addition to the controversial and much-litigated Individual Mandate, the Patient Protection and Affordable Care Act of 2010 (“ACA”) includes an equally controversial (though not quite as heavily litigated) “Employer Mandate.” The Employer Mandate can be found in new section 4980H of the Internal Revenue Code. Effective for plan years beginning in 2014, “applicable large employers” will face a choice. They must either (i) offer substantially all (at least 95%) of their full-time employees (employees working on average 30 or more hours per week) and their non-spousal dependants “affordable” health insurance providing “minimum essential coverage” and “minimum [actuarial] value” or face potential penalties. If such coverage is not offered penalties apply if any of their full-time employees qualify under the ACA for a premium tax credit or cost-sharing reduction in connection with the purchase of health insurance.

To implement the Employer Mandate, on January 2, 2013, the IRS published its proposed regulations concerning Shared Responsibility for Employers Regarding Health Coverage (“Large Employer Regulations”) in the Federal Register. Those regulations affect only those “employers constituting applicable large employers.” For 2014, an “applicable large employer” will be one who employed an average of at least 50 full-time equivalent employees on business days during calendar year 2013. This means that employers must now start keeping the records necessary to determine whether they will be considered “applicable large employers” in 2014 for purposes of the Employer Mandate.

A determination of the number of employees is crucial to determining whether an employer is an “applicable large employer,” and, therefore, subject to the Employer Mandate. That determination is not simple. The regulations are complex. This article will address (i) how to determine the number of full-time equivalent employees an employer has for purposes of the Employer Mandate; and (ii) what an employer might do to prepare for the 2014 effective date of the Employer Mandate.

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The U.S. Department of Labor’s Employee Benefits Security Administration (“EBSA”) recently provided additional guidance on its website regarding implementation of provisions of the Patient Protection and Affordable Care Act (PPACA), implementation of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA). This guidance, which is provided in the form of Frequently Asked Questions and responses, was prepared jointly by the Departments of Health and Human Services, Labor and the Treasury.

Some of the highlights from the guidance include the following:

• For preventive services, group health plans can steer individuals towards a particular high-value setting such as ambulatory care so long as the plan provides for a waiver of the co-payment for those individuals for whom it would be medically inappropriate to go to an ambulatory setting.
• Until regulations are issued by the Secretary of Labor, employers do not have to comply with the new automatic enrollment requirements in section 18A of the Fair Labor Standards Act. The Department of Labor intends to complete this rulemaking by 2014.
• While the PPACA generally prohibits distinctions based upon age in dependent coverage of children, distinctions based upon age that apply to all coverage under the plan, including coverage for employees and spouses as well as dependent children, are not prohibited.
• Under certain circumstances, issuers may screen applicants for eligibility for alternative coverage options before offering a child-only policy, provided this practice does not violate any state law.
• Small employers continue to be exempt from the MHPAEA requirements.
• Only employment-based wellness programs that are, or are part of, a group health plan are subject to the HIPAA nondiscrimination rules. Wellness programs that are not part of the group health plan may be covered by other federal or state nondiscrimination laws, but are not subject to the HIPAA nondiscrimination regulations.

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New York State employers who extend funeral or bereavement leave to employees after the death of a relative must, effective October 29, 2010, provide the same leave after the death of a same-sex committed partner. Although this amendment to the New York Civil Rights Law creates no obligation for employers who do not offer funeral or bereavement leave to any employees, it does require a change for the many New York employers who currently provide such leave to various groups of defined relatives, but not to same-sex committed partners. Those policies and related practices should be revised promptly to comply with the new law. Additionally, while the new law does not apply to employers outside New York State, they may want to consider similar revisions for business reasons.

The new law’s definition of a committed relationship as “a long-term relationship characterized by emotional and financial commitment and independence” arguably lacks clear boundaries. How long is long-term? How much proof can or should employers require to verify that every element of the definition has been met? These questions remain to be answered.

The exact revisions to funeral or bereavement leave policies likely will differ employer to employer. For example, some employers may decide to extend funeral or bereavement leave to all committed partners, not just same-sex ones. Other employers may prefer to extend funeral or bereavement leave as narrowly as possible to comply with the new law. Regardless of how employers amend their policies, however, all affected employers should do so immediately.

The end of a calendar year is often a good time for employers to focus on potential revisions to employee handbooks and other employment-related policies and procedures, in part because organizational changes are often implemented around the beginning of a calendar year. Thus, this is a good time to modify funeral or bereavement leave policies as mandated, as well as to consider revisions to other employment policies and practices.

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