The use of temporary employees provided by agencies that supply laborers, secretaries, nurses or other skilled or unskilled workers to the public and private sector is increasing. Employers who use these temporary agency workers’ must be wary of the relationships created by the use of the temporary agency workers. Are the temporary workers “employed” by the agency, the borrowing employer, or both, for purposes of the Pennsylvania Workers’ Compensation Act (the “Act”)?  The answer will determine which entity or entities may claim immunity from a common law action, under the exclusive remedy provisions of the Act.

The critical test for determining whether a worker furnished by one entity to another is “employed” by the latter, is whether the worker is under the latter’s right of control with respect to both the work performed and the manner in which the work is performed.  For example, suppose a municipal township needs a temporary worker to ride on the back of a municipal trash truck.  After receiving only minimal instruction, the worker falls from the moving truck on his first day of work and dies ten (10) months later.  Suppose the agency, Labor Ready, pays $770,000 in workers’ compensation benefits.  A civil suit is then initiated by the decedent’s estate against both Labor Ready and the Township.  Does the decedent’s estate have a viable civil claim against either entity? Under this fact pattern, the trial judge dismissed, on summary judgment, both Labor Ready and Rye Township, finding that both entities were “employers” entitled to protection under the immunity provisions of the Act.  The ruling was affirmed by the Commonwealth Court on appeal.  Nagle v. Labor Ready and Rye Township (Pa. Cmwlth. 2016).  Similar results have been reached in volunteer fire fighter liability cases, where both the volunteer fire company and the sponsoring township enjoy immunity.  Indeed the “borrowed employee” doctrine provides broad immunity in both the public and private sectors, at least where the borrowing employer exerts the requisite degree of control over the borrowed employee, (See, e.g., Hendershot v. Emmeci Northampton County 2016). A temporary agency supplied a machine operator to its manufacturing client and the agency employee sustained serious injuries while cleaning the machine.

Nevertheless, despite broad interpretation on the “borrowed employee” doctrine, employers have been found to be liable for damages beyond workers’ compensation, in circumstances where: (a) the requisite degree of control does not exist (i.e. a company leases a piece of equipment with an operator and the operator is then injured on the company’s premises) or (b) the borrowing employer forfeits its immunity by filing an Answer to the workers’ compensation claim petition denying that it is the employer, and alleging that the temporary agency is solely responsible.  Black v. Labor Ready (Pa. Super. 2010).

Employers should be sensitive to the range of potential outcomes when staffing positions with “borrowed employees,” and should review any temporary agency agreements to insure the broadest possible immunity from suit, along with proper indemnification language, with respect to agency employees who are hired into temporary positions or assignments.

Please contact a member of our Labor and Employment Group for specific legal analysis of temporary employment arrangements at your facility.

As if Counties could forget that Court employees are just a little different, the Commonwealth Court of Pennsylvania sent us another reminder when the Court held that the Pennsylvania Whistleblower Law does not apply to judicial employees.

Gregory Thomas was a Juvenile Probation Officer serving with the Washington County Court of Common Pleas until October 2014, at which time he was allegedly forced to quit. Prior to his resignation, Thomas had been a participant in an investigation regarding the misappropriation of funds by the Juvenile Probation Office. During the investigation, it was revealed that the Chief of the Juvenile Probation Office had directed Thomas to email the County’s purchasing office in July 2014 to state that a mixed martial arts training session had taken place on June 6 and 7 in partial satisfaction of the state’s 40-hour annual training requirement. The email sought, and was granted, funding for the training. No such training actually occurred, and Thomas confirmed to the investigating detectives that he had not attended this training; he alleges that he had been told by the Chief Probation Officer to tell the detectives otherwise.

The day after his interview with the detectives, Thomas was notified that he needed to resign or he would be fired for reasons not related to the investigation. Thomas brought suit against the County, Court Administration, and others alleging that he reported wrongdoing and misappropriation of funds when he spoke to the detectives, and therefore his forced resignation violated the Pennsylvania Whistleblower Law. The Defendants contended that the Whistleblower Law did not apply to judicial employees because doing so would violate the separation of powers doctrine. The trial Court granted the Defendants’ Preliminary Objections and entered judgment in their favor, finding that judicial employees are not subject to the Whistleblower Law.

In reviewing the case, the Commonwealth Court noted that the statute itself does not reference the Judiciary in the definition of “employer” or “public body,” and that prior case law established that the Legislature did not intend to include the Judiciary therein or it would violate their constitutional authority to hire, fire and supervise their employees. As such, the only way that the statute could apply was if the Court voluntarily waived sovereign immunity. Although Thomas argued that the Court had done so because the Code of Conduct for Judicial employees issued by the Administrative Offices of the Pennsylvania Courts specifically referenced the Pennsylvania Whistleblower Law, the Court disagreed that “the mere description of the Whistleblower Law in a Note…demonstrates the Court’s intent to bring the Judiciary under the scope of that Law.”

In particular, the Court noted that the reference to the Whistleblower Law was found in that section of the Code of Conduct related to the Duty to Report, which requires employees to report to their immediate supervisor any attempt to induce them to violate the Code of Conduct, and that the reference was a mere description of the Law. Nothing in the reference specifically states that the Law is applicable to the Judiciary, or otherwise indicates the Court’s intent to make the Law applicable. The Commonwealth Court stated that, considering the “vigilance” and “care” that the Court takes to protect its independence and the separation of powers, more than a general description of a legislative enactment would be required to demonstrate an intent to make the Law applicable to it. Because the Law did not apply to the Courts, the Preliminary Objections were properly sustained and judgement entered for the Defendants.

The Thomas v. Grimm case should serve as a reminder that there are special considerations when dealing with HR issues involving Court employees – and the rules for hiring, firing and supervision may be slightly different. A good County HR Department must be careful, therefore, not to overstate the rights and protections of Court employees while also advocating for the County’s position on an employment decision and respecting the separate role of the Courts. Aside from the specific reminder about the unique Court-County relationship, Thomas should also serve as a reminder to all public sector employers of the unique position they and their employees are in when it comes to the employment relationship, where they must be careful to navigate their role as a public service entity providing statutory and constitutional resources to its constituents while also respecting the constitutional and other legal rights of employees.

In 2015, we discussed the new joint-employer standard that was articulated by the National Labor Relations Board in Browning-Ferris Industries of California, Inc.  As a reminder, the NLRB held that a joint-employer relationship may be found if two or more entities “are both employers within the meaning of common law, and if they share or co-determine those matters governing the essential terms and conditions of employment,” such as wages, hours, work assignments, and control over the number of workers and scheduling.  The Board further found that a joint employer is not required to exercise its authority to control terms and conditions of employment, and recognized that control may be “reserved, direct and indirect.”

The effect of this new, employee-friendly standard was a broadening of the Board’s criteria used to consider whether a joint-employer relationship exists.  In other words, it became much more likely that companies that use contract or contingent labor could face liability as the joint employer of those workers.  The story doesn’t end there, however.

The Browning-Ferris decision was appealed, and the appeal is currently pending before the United States Court of Appeals for the D.C. Circuit.  If the court’s remarks during oral arguments that were recently held are any indication of the fate of the new joint employer standard, employers have reason for cautious optimism.

The D.C. Circuit’s panel of judges described the Board’s new test as “unworkable,” with one jurist remarking that the NLRB had “dropped the ball” in its 2015 decision.  She openly questioned whether the Board was capable of policing the line between genuine joint employment and contractor relationships.  Other members of the panel criticized the new test as “unclear.”

While there is no guarantee that the D.C. Circuit will overturn the NLRB’s decision in Browning-Ferris, early signs certainly seem to indicate that such an outcome is quite possible.  We will continue to monitor the status of this case and will report any further developments right here on our blog.  In the meantime, the NLRB’s decision still stands and employers should continue to operate accordingly.

In the Third Circuit, an employer’s honest belief that an employee committed misconduct can now serve as a defense to a retaliation claim under the FMLA.  With the recent decision in Capps v. Mondelez Global, LLC (found here) the Third Circuit joins the Seventh, Eighth and Tenth Circuits in providing such a defense.

In the Capps case, Mondelez (the employer) fired Fredrick Capps (a longtime employee) for what Mondelez believed to be dishonest use of intermittent FMLA leave.  During the time of his employment, Capps suffered from a medical condition that required him to undergo bilateral hip replacement in 2003.  Thereafter, he experienced flare-ups that caused him severe pain, which sometimes lasted for days or weeks at a time. As a result of his condition, Capps requested intermittent FMLA leave to cover his periodic time off work.  Because of his ongoing condition, Capps was recertified for intermittent FMLA leave every six months from 2003 to the end of his employment.

On February 14, 2013, Capps reported that he would not be in to work because he was experiencing pain caused by a flare-up of his condition.  Later that same day, Capps drove to a local pub, where he got something to eat and also had a few beers and shots of alcohol with his friends.  About three hours later, Capps attempted to drive home, but was arrested for Driving Under the Influence of Alcohol (“DUI”) and spent the night in jail.  After being released from jail the next morning, Capps again called off work using intermittent FMLA leave because he said he was experiencing leg pain from his condition.

When Capps returned to work, he did not report his DUI arrest.  However, over the next several months he called off work numerous times and requested intermittent FMLA leave for his condition.  Interestingly enough, during this same time period, Capps was required to attend court hearings and other appointments related to his DUI charge.

On August 7, 2013, Capps pled guilty to the DUI charge and immediately served 72 hours in jail.  When the employer became aware of Capps’ conviction early in 2014, an investigation commenced looking into Capps’ attendance from the time of his DUI arrest to his guilty plea.  This investigation uncovered that Capps’ arrest date and several subsequent court dates corresponded with days that Capps had also used intermittent FMLA leave.  After further investigation, including discussions with Capps himself, it became clear that the documentation Capps submitted did not support his need for FMLA leave on the days that he also appeared in court.

Subsequently, Capps was discharged based on his violation of the company’s Dishonest Acts Policy and misuse of FMLA leave. The termination letter sent to Capps stated: “You claimed to be out due to [ ] FMLA related issues on multiple dates. The documentation you produced does not support your claim of [ ] FMLA related absences.”  After his termination, Capps filed suit claiming, among other things, that the employer retaliated against him for exercising his rights under the FMLA.

After having his FMLA retaliation claim dismissed on summary judgment, Capps’ argued on appeal that the District Court improperly dismissed his claim because the employer was mistaken in its belief that Capps misused his FMLA leave or was otherwise dishonest. However, the Third Circuit affirmed the dismissal of Capp’s FMLA retaliation claim emphasizing that an FMLA retaliation claim requires proof of an employer’s retaliatory intent.  In other words, Capps could not show that the employer’s reasonable belief that he was dishonest and misused his FMLA leave was a pretext for retaliation.

While employers should always proceed with caution before terminating an employee around the time he or she requests, takes, or returns from FMLA leave; the Third Circuit’s adoption of the honest belief defense provides a significant means for employers to defend against FMLA retaliation claims. More specifically, employers that discharge an employee based upon an honest belief that the employee is abusing FMLA leave may now be more likely to prevail on a motion for summary judgement.

To be clear, this case is not a get out of jail free card for employers.  Before the decision is made to terminate, employers must be sure that there is supporting evidence of the employer’s honest belief. In the Capps case, this took the form of a thorough investigation of the employee’s absences along with an opportunity for the employee to explain and support his actions.  Yet, when an employer has supporting evidence and reasonably believes that an employee abused FMLA leave or was otherwise dishonest about the need for such leave, this honest belief will serve as the employer’s defense to a FMLA retaliation claim.

In 2010, two employees filed a claim against their former employer, Robert Half International, Inc., alleging that it violated the Fair Labor Standards Act (“FLSA”). In addition to individual claims, the plaintiffs brought a collective action on behalf of all other similarly situated employees. The plaintiffs, however, had signed employment agreements containing arbitration clauses, which generally required that any dispute arising out of their employment be submitted to arbitration. It was silent as to class-wide claims.

The employer filed a motion to compel the employees to resolve their claims through arbitration on an individualized basis. The court ordered the employees to submit their claims to arbitration but left for the arbitrator to decide whether the claims could proceed on a class basis. The arbitrator subsequently ruled that class arbitration was permitted under the agreements. The employer appealed and argued that the question of whether the employees could submit claims to arbitration on a class-wide basis is one to be decided by the courts, not an arbitrator.

The First Shoe

The Third Circuit agreed. The court first explained that it is generally the province of the courts to resolve “questions of arbitrability.” That is, courts have narrow authority to decide whether or not an arbitration clause applies to particular claims and/or particular parties. On the other hand, arbitrators decide all issues they have been authorized by the parties to resolve. This includes procedural questions, and in traditional litigation, questions of class are procedural in nature. So, in this case, the court was presented with the following question: when an arbitration clause is silent as to arbitration on a class basis, is the permissibility of class arbitration a “question of arbitrability” to be decided by the court, or is it a procedural question to be decided by an arbitrator?

In a precedential opinion issued in 2014, the Third Circuit held that it was a question of arbitrability reserved for the court, because it was an issue of whether the clause applies to particular claims and/or parties. With this ruling, the Third Circuit then remanded the case to the district court to determine whether the employment agreements authorized class arbitration. On remand, finding no explicit language in the arbitration clauses, and finding no other evidence to the contrary, the district court found that class arbitration was not permitted under the agreement. The employees appealed.

The Other Shoe (sort of)

In a non-binding decision issued at the end of January, the Third Circuit agreed that class arbitration was not permitted. First, the court recognized that “a party may only be compelled to submit to class arbitration if there is a contractual basis for concluding that the party agreed to do so.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l, Inc., 559 U.S. 662, 684 (2010). To determine whether the parties agreed to class arbitration in this case, the court first looked for explicit language of authorization, noting that under Third Circuit precedent, “silence regarding class arbitrability generally indicates a prohibition.” Quillion v. Tenet HealthSystems Phila., Inc., 673 F.3d 221, 228 (3d Cir. 2012). It found no explicit language. Despite this finding and its precedent concerning the silence of class arbitration, the court did not stop there. It went on to look for implicit authorization elsewhere in the employment agreement. It again found nothing and affirmed that the agreement did not authorize class-wide arbitration.

While this ruling resolves this case and gives guidance moving forward, it does not definitively answer whether the absence of explicit language precludes class arbitration. To the contrary, the court’s analysis suggests that class arbitration could be inferred from other language in the employment agreement. So, going forward, to avoid a court making such an inference – one contrary to your true intent – inclusion of explicit language prohibiting class arbitration remains the best policy. However, you must be aware that the National Labor Relations Board takes the position that explicit prohibitions of class arbitration violate the National Labor Relations Act. Three courts of appeals, among other courts, have disagreed and overturned the Board’s position. Stay tuned, as the Supreme Court of the United States is set to resolve this question later this year.

A few weeks ago, a jury in New Jersey federal court found that Lockheed Martin discriminated against a former employee. The employee claimed that Lockheed violated federal and state laws by discriminating against him on the basis of age, including by paying him less than his younger co-workers. The jury’s award: $51.5 million ($1.5 million in compensatory damages and $50 million in punitive damages).  Although the claim was only partially based on unequal pay, and although the punitive damages award is constitutionally suspect (U.S. Supreme Court precedent holds that punitive damages should generally not be more than ten times the amount of compensatory damages), the award is indicative of an ever-emerging emphasis on pay equity.

Since January of 2016, several states have enacted equal pay statutes, and several others have pending legislation. California, New York, Maryland, and Massachusetts all have statues that prohibit pay discrimination on the basis of sex (Maryland’s also includes gender identity). Each of these statutes makes it easier for employees to establish pay discrimination claims, including requiring no proof of intent. One state, however, allows employers to establish an affirmative defense. Under Massachusetts’ statute, which is set to go into effect in July 2018, an employer has an affirmative defense if it completed a self-evaluation of its pay practices within three years of the claim, and it made reasonable progress toward eliminating pay differences revealed by the self-evaluation.

It is not just states that have turned their focus toward compensation. Our federal contractor subscribers – recognizing that Lockheed Martin is a federal contractor (the biggest, actually) – may find themselves wondering how aggressive the Office of Federal Contract Compliance Programs (OFCCP) has become with respect to compensation. If its lawsuit against Google is any indication, OFCCP has become quite aggressive. Typically, during a compliance audit OFCCP will require employers to provide compensation data for all current employees to ensure no disparity across races and genders. With Google, it went further. It demanded wage histories, changes in compensation, and employee contact information. When Google refused, OFCCP filed a lawsuit seeking an injunction and threatened to cancel all of Google’s federal contracts.

Finally, even if you are not in a state that has current or pending pay equity statutes, and even if you are not a federal contractor, employers may need to report compensation in the future. For employers with 100 employees or more, the Equal Employment Opportunity Commission has proposed to collect compensation data by sex, race, and ethnicity for each job category. Thus, starting in March 2018 – assuming no changes occur under the new Trump administration – those employers will be required to include compensation information in their EEO-1 report. According to the EEOC, this “will provide a much needed tool to identify discriminatory pay practices where they exist in order to ensure that fair pay practices are put in place.”

Considering all this momentum toward ensuring pay equity, compensation has possibly become one of employers’ greatest vulnerabilities.  Now may be the time to conduct an internal analysis – preferably one shielded by attorney-client privilege – to determine whether disparities exist within your compensation structure. Stay tuned for future podcasts, webinars, and seminars that will address this issue in part.

On November 3, 2016, the National Labor Relations Board issued a Decision and Order in Trump Ruffin Commercial, LLC, finding that the Trump International Hotel, Las Vegas unlawfully refused to bargain with UNITE HERE International Union after the union won a representation election among the Hotel’s housekeeping, food and beverage and guest service employees.

….In other news, just five days later, Donald Trump was elected President of the United States with the pledges to Make America Great Again, to cultivate more good paying jobs for Americans and to undo much of the agenda of the Obama administration.

Over the past several Presidential transitions, the Human Resources community has become accustomed to the swinging pendulum in the areas of labor and employment law.  We know change is coming.  We’re just not always sure what exactly it will involve.   Everyone remembers the threat of unions being certified on the basis of a card check, right?  That didn’t happen in 2009, but of course quickie elections did.  So making specific predictions on Inauguration Day can be dangerous.   But as the new Administration now has officially taken over, we have to at least try.

Here’s an easy one:  President Trump is unlikely to be appointing what we would call traditional candidates to run the departments and agencies that regulate the American workplace.    While he has nominated some people who have significant governmental service on their resumes, the current list includes a fair share of people with no such experience – – CEOs, philanthropists, investment bankers, a neurosurgeon, even the co-founder of World Wrestling Entertainment.   These appointments do not signal “business as usual” for the federal government, nor did the President who, in his inaugural address, pledged to transfer power from Washington back to the American people.

At first blush, this would portend wholesale rollback of workplace regulations.  Indeed, President Trump’s nominee for Secretary of Labor, fast-food executive Andrew Puzder, has been a critic of substantially increasing the minimum wage and a vocal opponent of the Obama administration’s efforts to make more workers eligible for overtime pay.  And critics have noted similar opposition by other nominees to what has been the recent mission or focus of the agency that they may be leading (See Governor Rick Perry and Betsy DeVos).

But here’s the rub:  a substantial portion of President Trump’s electoral base of support likely will not support the pendulum swinging back in ways that make their workplaces less safe or adversely impact their earnings.  So…this will be a bit more complicated.

What can we say now in January 2017 with confidence?

  • We’re not going to get back all of that time we spent learning the ever changing minutiae of the Affordable Care Act.  But we can certainly anticipate that there will be new regulation impacting employer provided health insurance.
  • We will see change in leadership at the Equal Employment Opportunity Commission.  The current EEOC Chair’s term will end in July 2017, and the new Chair will likely fill the now vacant EEOC General Counsel position.   That new leadership is less likely to retain the current EEOC’s focus upon pay equity issues and seeking to expand gender identity and sexual orientation protections through selective litigation.   And let’s not forget the agency’s proposed regulations that would require employers to provide compensation data and hours for all employees as part of the EEO-1 reporting process.  We think that it is unlikely that these requirements will become effective in March 2018, as currently planned.
  • The NLRB will be looking at the bureaucratic version of Extreme Home Makeover.  Readers of our Annual NLRB Year in Review will recall that the Obama Board has involved itself in everything from revising the representation election timeline, to creating rights to use your email system for organizing activity to uncovering the dastardly hidden meaning of the most innocuous provisions of your employee handbook.  They expanded the concept of joint employment to the point you might have to sit at the bargaining table to discuss wages, benefits and working conditions of people who are not even your employees.  And then when they were done with that, they even tried to get involved in college football!  The party’s soon over at the Board.  President Trump will have the opportunity to fill two current Member vacancies on the Board as soon as he gets down to work.  More critically, by November he will have the opportunity to replace NLRB General Counsel Richard Griffin Jr., an Obama appointee, former union lawyer and spearhead for most of the NLRB’s most aggressive initiatives.
  • OSHA recordkeeping requirements should be reduced.  We know how this has been an area of focus over the past 8 years and has caused more work for employers.  And the new silica rules and anti-retaliation rules that seek to effectively prohibit mandatory post-accident drug testing and safety incentive programs may soon be on the cutting room floor.

So, that’s enough prognostication on Day 1 of the Trump Administration.  Stay tuned!

 

Just over thirty years ago, Congress passed the Immigration Reform and Control Act (“the Act”). It requires that employers verify the identity and work authorization of the people they hire. It also mandates that such verification be done on a form designated by the Attorney General. We know that form as the I-9. From time to time, the U.S. Citizenship and Immigration Service (USCIS) issues revised versions of the I-9. It did so again last November.

As we outlined in our original blog post, the new version, found here, contains a few modifications. First, it is designed to be more computer-friendly, with dropdown lists, calendars for filling in dates, and on-screen instructions – all useful in eliminating common errors discovered during audits. Additionally, it has prompts to ensure information is entered correctly, the ability to have multiple preparers, a dedicated area for additional information, and a supplemental page for the preparer. Finally, the new version changes Section 1. Instead of asking for “other names used” by the employee, it asks for “other last names used.”

While employers had the option to start using the new version immediately, they are required to start using the new version no later than January 22, 2017. On the lower left corner of the form, you will see that the form has a revision date of “11/14/2016 N.” The “N” denotes that after the effective date of the form, previous versions are no longer valid, and employers cannot use them to satisfy the requirements of the Act. In its news release about the update, the USCIS indicated that the new Form I-9 will become effective on January 22, 2017.

So, if you have yet to make the switch, now is the time. Keep in mind, however, that despite the implementation of the new form, employers must continue to comply with existing rules for storage and retention with respect to all previously completed forms.

The Philadelphia City Council recently passed Bill No. 160840, a wage equity ordinance (the “Ordinance”), that will amend Philadelphia’s Fair Practices Ordinance to prohibit employers or employment agencies from inquiring about the wage history of potential employees.  Among other things, the Ordinance also includes an anti-retaliation provision, which prohibits any form of retaliation against a prospective employee for failing to comply with a wage history inquiry.

More specifically, the Ordinance provides that it is an unlawful employment practice for a covered employer to:

  1. inquire about a prospective employee’s wage history;
  2. require disclosure of wage history;
  3. condition employment or consideration for an interview on disclosure of wage history; or
  4. retaliate against a prospective employee for failing to comply with any wage history inquiry.

Furthermore, the ordinance also makes it an unlawful employment practice for an employer to “rely on the wage history of a prospective employee from any current or former employer when determining the wages for such individual at any stage in the employment process,” which includes the negotiation or drafting of any employment agreement.  However, the Ordinance does provide an exception that permits an employer to rely on any wage information that is knowingly and willingly disclosed by an applicant.

It is important to note that this Philadelphia Ordinance will take effect 120 days after it is signed into law by Mayor Jim Kenney, who has expressed his support.  Accordingly, if the Ordinance is signed this month, employers in Philadelphia can expect to see the Ordinance take effect in May of this year.

In anticipation of the enactment of this Ordinance, Philadelphia employers can prepare by:

  1. removing any questions on employment applications that may in any way seek information about salary or wage history;
  2. train hiring managers and interviewers to avoid asking questions about an applicant’s wage history;
  3. refrain from relying on an individual’s wage history (if known) when deciding the appropriate wages/salary to pay a prospective employee; and
  4. review existing policies and practices to ensure compliance with the Ordinance.

This Philadelphia Ordinance is recent example of a growing trend to prohibit employers from requesting and relying on an applicant’s wage history.  This trend has emerged in an effort to address what many call the “gender pay gap.”  In light of these recent actions by state and local governments, employers across Pennsylvania and beyond should stay informed about further developments in this area, as similar laws may soon be proposed and enacted in other locations.

The Pennsylvania Department of Labor and Industry recently announced that all employers in the Commonwealth will be required to pay their share of unemployment compensation taxes online.  The new rule takes effect January 1, 2017 and aims to reduce paperwork while streamlining the payment process.  The time for making these electronic payments will depend on whether an employer is considered “contributory” or “reimbursable” under the Unemployment Compensation Law.

Private, for-profit entities are contributory employers and pay unemployment taxes based on a contribution rate and their taxable wage base.  For these employers, the electronic payment requirement begins with the first calendar quarter filing period in 2017.

Political subdivisions and some nonprofit organizations may qualify as a reimbursable employer under the Law.  Reimbursable employers pay back the Unemployment Compensation Fund for the amount of unemployment benefits charged to their account.  These entities are billed either monthly or quarterly and must begin using the electronic payment system with the first 2017 benefit charge period.

Of course, the new rule comes with a set of teeth to encourage participation.  Failure to comply with the electronic payment requirement may result in a penalty of 10% of the payment up to a maximum of $500.00 per occurrence.  The minimum penalty for noncompliance is $25.00 per occurrence.

Employers that are unable to comply with the electronic payment requirement can submit a request for a waiver.  The Department will review each request and issue determinations on a case-by-case basis.  Waiver request forms are available  online.

The electronic payment process will be managed through the Unemployment Compensation Management System, which can be accessed here.  The site also contains useful information about how to register for and make electronic payments.