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.

With the holiday season officially upon us, many employers are finalizing plans to host a party for their employees.  These festivities offer a time for colleagues to celebrate the year’s accomplishments, to extend season’s greetings, and to bond with one another in a less formal environment.  Sometimes, though, the holiday cheer can turn into a nightmare for employers.

By keeping an eye out for the many issues that may arise during an office holiday party, and by sticking to a few simple rules, you can ensure that your organization stays on the “nice” list this year.

Remember that Holidays Aren’t the Same for Everyone

Title VII of the Civil Rights Act of 1964 and many state laws, including the Pennsylvania Human Relations Act, protect employees from discrimination based on race, sex, national origin, and religion, among other things.  Unfortunately, holiday celebrations have landed some employers in legal hot water during the most wonderful time of the year, including: disciplining a Muslim employee for refusing to participate in Christmas activities (EEOC v. Norwegian Am. Hosp.) and forcing a Jehovah’s Witness employee to use vacation time to skip a holiday party (Westbrook v. NC A&T State Univ.).  You can avoid these potential problems by taking the following steps:

  • Hold holiday parties off-premises and during non-work hours if possible.
  • Make attendance optional. If the party is held outside of work hours and optional, then employees who may not celebrate holidays for religious or ethnic reasons can miss the party without forfeiting pay or suffering discipline.
  • Consider offering a “holiday party” or “end of year party” instead of a celebration linked to a particular religious observance. Although you may not get sued for simply having a “Christmas Party” or “Hanukkah Party,” adding religious overtones to your celebration may leave some workers feeling alienated or unwelcome.
  • If an employee has a religious or cultural objection to participating in your company’s holiday celebration, explore whether there’s a reasonable accommodation that will alleviate that employee’s concerns.

Keep an Eye Out for Bad Santas

Cultural and religious issues aren’t the only ones that can cause headaches for employers this time of year. In Brennan v. Townsend & O’Leary Enterprises, Inc., an employer held a holiday party for its employees.  A supervisor dressed as Santa Claus and asked his female subordinates to sit on his lap while he asked questions about their love lives.  One female employee sued on the basis of sexual harassment.  Ultimately, the case went to trial, where a jury awarded the employee $250,000.  The verdict was overturned on appeal, but the employer’s legal costs in defending the claim figure to be astronomical.

Work to prevent similar unfortunate scenarios by reminding employees that while holiday parties are meant to be fun and informal, they are still work-related functions and employment policies, including your anti-harassment policy, apply.  At your party, everyone should treat each other with same dignity and respect as they do during a normal workday.  Employees should be encouraged to report any questionable behavior so that it can be immediately corrected if necessary.  If you follow our blog, you already know that your workplace should be free from sexual harassment; your holiday party should be too!

If you’re Serving Egg Nog (or Other Alcoholic Beverages)…

Many employers choose to serve alcohol to add to the cheer and festive atmosphere at their holiday parties.  There’s usually nothing wrong with this from a legal perspective, and employees often appreciate the ability to enjoy an adult beverage while having a good time with work colleagues.  Serving alcohol at a work function does have its risks, though.  For instance, personal inhibitions often dissolve the more one drinks.  So what can you do to slow employees down while still keeping the party going?  Well…

  • Offer a certain number of drink tickets to each employee. By limiting the number of drinks available to your workers, you’re taking a big step toward keeping someone from drinking too much.
  • Fill your drink menu with beverages that contain relatively low amounts of alcohol. Stick to beer and wine, and leave the hard stuff at home.  Also offer plenty of non-alcoholic drink choices.
  • Make food available to help slow the absorption of alcohol.
  • Consider finding a few volunteers who will not drink (good luck!) and monitor the party. These folks can see whether someone has had too much to drink and help arrange for cabs and/or designated drivers.
  • Close the bar well before the event is over. Allow an hour or so for employees to continue mingling after last call.
  • Provide some form of transportation to and from the event.

Although there are ways for your festivities to turn into trouble, you certainly don’t need to be a Grinch to avoid the hassle.  Just remember that establishing and following a set of reasonable ground rules will foster a safe and happy holiday event for everyone.

Public employers in Pennsylvania beware: if you implement an attendance policy designed to get your employees to show up for work, you may commit an unfair labor practice!  If your employees are represented by a labor union, and your policy outlines disciplinary action, then you must bargain with the appropriate union before issuing discipline under the policy.  The employer in Chester Upland Sch. Dist. v. Pa. Labor Relations Bd., learned that the hard way.

In that case, the public school district unilaterally adopted a new attendance and punctuality policy.  The new policy applied progressive discipline to employees who reached a certain number of absences due to personal illness.  The updated policy was adopted shortly after the expiration of a collective bargaining agreement between the district and its employees.

Upon learning of the change, the employees’ union filed an unfair labor practice charge, arguing that the district committed an unfair labor practice by adopting the policy without engaging in collective bargaining.  The union pointed to the prior collective bargaining agreement’s sick leave provisions, which provided each employee with eleven sick days per school year and was silent on discipline.  The district countered that the updated policy did not impose a new source of discipline; employees were always subject to discipline for attendance violations.  Rather, according to the employer, the new policy simply advised employees as to how attendance issues were tracked for disciplinary purposes.

The Pennsylvania Labor Relations Board rejected the employer’s arguments, finding that the district committed an unfair labor practice by unilaterally changing the terms and conditions of employment through adopting the new attendance policy.  The district appealed to the Commonwealth Court, which upheld the Board’s determination.  The Court provided several reasons for doing so.

First, it recognized the PLRB’s long history of treating sick leave policies as mandatory subjects of collective bargaining.  Second, the Commonwealth Court held that new policy did not simply explain how the district tracked absences for disciplinary purposes; instead, it specifically imposed progressive discipline for using sick days.  An employer’s unilateral changing of terms and conditions of employment, explained the Court, is an unfair labor practice regardless of whether it happens during the term of a CBA, following the expiration of a CBA or during the course of negotiations.  Moreover, the new policy directly conflicted with the express terms of the collective bargaining agreement, which did not provide for disciplinary action.

This case serves as an important reminder to public employers in Pennsylvania that when adopting new policies, a careful examination of the appropriate collective bargaining agreements is required.  Before implementing new rules that can result in disciplinary action, negotiation is typically required.  Adopting new disciplinary rules without engaging in collective bargaining will not withstand the scrutiny of the PLRB or Pennsylvania courts.

On November 28, 2016, a federal district court issued an order that allowed OSHA to move forward with implementation of its controversial standards related to mandatory post-accident drug testing programs and incident-based employer safety incentive programs.  As McNees previously reported, OSHA delayed enforcement of these parts of its final rule, aimed to “Improve Tracking of Workplace Injuries and Illnesses” (the “Rule”), until December 1, 2016.  Absent any further developments, the Rule is set to become enforceable December 1, 2016.

However, while the Rule will become enforceable, its continued validity remains questionable.  The court’s order does not dispose of the underlying complaint that asked the court to vacate the relevant parts of the Rule, the order only denied the request for a preliminary injunction.  Another layer of uncertainty has been added since Donald Trump was elected president.  President-elect Trump’s administration may ultimately decide to undo the relevant provisions or retreat from the prior administration’s expansive interpretations after he takes office in January 2017.  This creates a situation where employers need to comply with the controversial standards for now, but OSHA or a court may indicate otherwise in the not-so-distant future.  Further background on these provisions, OSHA’s guidance, and the ongoing litigation is provided below, with a focus on post-accident drug and alcohol testing.

The Controversial Provisions of the Rule

When OSHA issued the Rule in May 2016, the agency created an enforcement tool allowing it, for the first time, to independently cite employers if their policies for post-accident drug or alcohol testing, employee discipline, or safety incentive programs are deemed retaliatory because they discourage or deter injury reporting.  The controversial portions of OSHA’s Rule are at 29 C.F.R. § 1904.35(b), which requires employers to “establish a reasonable procedure for employees to report work-related injuries and illnesses promptly and accurately.”  A procedure is “not reasonable,” according to the Rule, “if it would deter or discourage a reasonable employee from accurately reporting a workplace injury or illness.”  In conjunction with this requirement, the Rule prohibits employers from discriminating or retaliating against employees for reporting work-related injuries or illnesses.

Essentially, the Rule provides that blanket post-accident drug and alcohol testing policies will discourage injury reporting and could be retaliatory..  Drug or alcohol testing are not specifically mentioned in the text of the Rule.  However, OSHA has provided interpretations in the Rule’s preamble and guidance that establish authority to cite employers for workplace policies that OSHA deems to have discouraged reporting or otherwise to be retaliatory.  For the first time, OSHA will be able to cite an employer for retaliation even if an employee does not file a complaint.  In October 2016, OSHA posted guidance on its Rule webpage related to an Employee’s Right to Report Injuries and Illnesses Free from Retaliation, including a Memorandum for OSHA’s Regional Administrators on implementation of the guidance (together, the “Guidance”).  The Guidance confirms that OSHA’s enforcement will apply to both drug and alcohol testing, and that workplace testing policies implemented pursuant to federal or state law should not be affected.  Yet, significant uncertainty remains for employers.

Lingering Uncertainty and Next Steps for Employers

The uncertainty surrounding the Rule is twofold.  First, from a substantive perspective, implementation is not entirely clear, despite the Guidance.  Employers will be forced to grapple with competing – and potentially conflicting – obligations under OSHA’s Rule and other federal and state laws as they relate to post-accident drug and alcohol testing.  On one hand, employers who require mandatory post-accident testing through sound workplace policies may be cited if OSHA determines that drug or alcohol use was not likely to have been a contributing factor to the reported injury.  On the other hand, if employers do not require mandatory testing across the board (e.g., for all lost-time injuries), workplace incidents related to drug or alcohol use arguably may increase, and selectively choosing individuals for testing may expose employers to claims that they profiled or targeted specific workers.

Second, such substantive issues now threaten the standards’ continued validity, through both litigation and executive action.  In July 2016, several trade associations, along with a workers’ compensation insurer and its insureds, initiated the litigation described above.  The action filed in the U.S. District Court for the Northern District of Texas seeks to vacate the relevant parts of the Rule to the extent they prohibit or limit routine mandatory post-accident drug and alcohol testing programs and incident-based safety incentive programs.  The plaintiffs alleged that OSHA did not have authority to create the new enforcement tool for retaliation, and that OSHA disregarded substantial evidence supporting that routine, mandatory drug and alcohol testing actually enhances workplace safety.  In the midst of the litigation, OSHA decided to postpone enforcement until November 1, 2016 to issue the Guidance.  OSHA later agreed to further delay enforcement of the Rule until December 1, 2016, but its Guidance also urged employers to review their programs and policies to determine whether they may be deemed retaliatory with respect to injury reporting.

Now that the court has denied the plaintiffs’ request for a preliminary injunction, employers who have not consulted the OSHA Guidance and prepared for timely compliance should do so by determining whether revisions to their workplace policies are necessary.  The fate of OSHA’s approach is still in the hands of the federal district court, and, even before the court decides the merits, the Trump administration may undo the OSHA standards or interpretations issued under the Obama administration or refuse to enforce them.  Nonetheless, in the interim, employers must understand how the OSHA standards and the Guidance affect their programs.  Risks of noncompliance include potential OSHA citations, including higher penalties in effect since August 2016.

Next Steps for Employers

As noted, the Rule is effective December 1, 2016, so employers need to take steps to ensure compliance.  Need assistance?  McNees contacts that can help include: Steve Matzura, Paul Clouser, Denise Elliott, Joe Sileo and Andrew Levy.

On November 18, 2016, the IRS recently announced limited relief for employer reporting on Forms 1094 and 1095 for the 2016 tax year. The relief extends the deadline for furnishing statements to individuals, but does not extend the deadline for filings with the IRS. The IRS also provided penalty relief for some filers. The relief set forth in Notice 2016-70 provides:

  • Statements to Individuals Extended. The deadline for furnishing Forms 1095-B and 1095-C to individuals is extended by 30 days, from January 31 to March 2, 2017. No further extension may be obtained by application to the IRS.
  • No Extension for Returns Filed With IRS. The Notice does not extend the due date for filing Forms 1094-B and 1094-C (and related Forms 1095) with the IRS. Accordingly the deadline remains February 28, 2017 for paper filings, and March 31, 2017 for electronic filings. However, filers may obtain an automatic 30-day extension by filing Form 8809 on or before the regular due date.
  • Good Faith Penalty Relief. The IRS will again provide penalty relief for entities that can show they have made good faith efforts at compliance. No penalties will be imposed on entities that report incorrect or incomplete information—either on statements furnished to individuals or returns filed with the IRS—if they can show they made good faith efforts to comply with the reporting requirements. Penalty relief is not available to entities that fail to furnish statements or file returns, miss an applicable deadline, or are otherwise not making good faith efforts to comply.

While the Notice indicates that the IRS does not anticipate providing similar relief for the 2017 tax year, much will depend on changes to the Affordable Care Act under the Trump administration.

In a surprising 11th-hour move, late Tuesday, November 22, 2016, a Texas federal court issued a nationwide preliminary injunction blocking the U.S. Department of Labor’s new Fair Labor Standards Act “white-collar” overtime exemption regulations from taking effect on December 1, 2016.

U.S. District Judge Amos Mazzant, who was appointed to the federal bench in 2014 by President Obama, issued the injunction stopping the DOL from implementing the new regulations.  In a case brought by 21 states against the DOL, Judge Mazzant found that the DOL acted without statutory authority when it issued regulations more than doubling the current minimum salary requirement and providing for automatic updates of the minimum salary amount every three years.

At the very least, the injunction will put on hold the effective date of the new regulations, which had been December 1.  This means that the existing FLSA regulations, with the minimum weekly salary requirement of $455, will remain the law of the land come December 1.

Employers now face considerable uncertainty.  Many employers already have made changes to employees’ salaries and overtime exempt statuses in anticipation of the new regulations taking effect next week.  Other employers have sent communications to employees announcing changes that will take effect next week, all in response to the new regulations.

However, the fate of the new regulations is now in serious doubt.  The Trump Administration is set to assume control of the White House in January.  While yesterday’s decision likely will be appealed by the DOL, it is not clear whether and to what extent the Trump DOL will pursue the appeal and continue to defend the regulations’ validity in court.

As a result of yesterday’s injunction, it now appears that the new regulations will not take effect on December 1.  What lies ahead for the regulations is less clear, creating frustrating uncertainty for employers and employees alike.

Now that we have all had some time to absorb the national election results, many are wondering how the Affordable Care Act will change during a Trump presidency.  While there is a great deal of uncertainty surrounding the future of the ACA, our recommendation to those currently covered by the Act is to continue to comply until any changes have been finalized.

Many believe that an immediate and complete repeal of the ACA is unlikely because the Republicans lack a congressional super-majority (e.g., control of the House of Representatives and a filibuster-proof Senate) and without a comprehensive alternative approach in place, 20 million Americans could lose health coverage in the event of a complete repeal.

Even though an immediate and complete repeal is unlikely, we do expect that there will be changes to specific sections of the Act through the budget reconciliation process, which reaches only the revenue components of the Act or by regulatory action, which modifies the official interpretation of certain aspects of the law.  Any modification or repeal of portions of the Act will require congressional action, which will not be filibuster-proof because the Republican-controlled Senate falls short of the 60 votes required to prevent filibuster.  On the other hand, changes brought by regulatory action would not involve Congress, but would require issuance of new regulations by the newly appointed Secretary of Health and Human Services.

While we can easily predict those sections of the Act that are likely to be targeted under the new administration (e.g., individual mandate, Cadillac tax, employer mandate, employer reporting), such changes are unlikely to be immediate.  However, as this election has shown us, anything is possible.  Nonetheless, we recommend that our clients stay the course with respect to ACA compliance and continue preparing for 2017 as though the Act will remain through the end of 2017.  We will continue to monitor developments in Washington in order to keep our clients up-to-date on changes to the Act and its regulations.

U.S. Citizenship and Immigration Services (UCIS) has released a revised version of the I-9 Employment Eligibility Verification Form.  The revised form must be used exclusively beginning on January 22, 2017; until then, employers may use either the new version or the old version (which is dated 3/8/2013).  Most of the revisions to the I-9 operate to allow for easier electronic completion, while others aim to streamline the employment eligibility verification process.  Changes to the form include:

  • Drop-down menus in (electronic format)
  • On-screen instructions for completing the form (electronic format)
  • Prompts to ensure the entry of accurate information (electronic format)
  • More space for providing additional information
  • Areas to enter the names of multiple preparers or translators

Despite these changes, the purpose of the I-9 Form remains the same: to verify the identity and employment eligibility of individuals seeking work in the United States.  Electronic and printable versions of the revised I-9 can be accessed here.

The Equal Employment Opportunity Commission (‘EEOC”) has been aggressively advancing its position that Title VII of the Civil Rights Act of 1964 prohibits discrimination based on sexual orientation even though sexual orientation is not expressly identified as a protected class. More information on the EEOC’s position is available here. Recently, the United States District Court for the Western District of Pennsylvania agreed with the EEOC’s position. In, U.S. Equal Employment Opportunity Commission v. Scott Medical Health Center, P.C., U.S. District Judge Cathy Bissoon concluded that discrimination based on sexual orientation is prohibited by Title VII.

In its complaint, the EEOC alleged that a former gay male employee who worked for Scott Medical in a telemarketing position, was subject to harassment, anti-gay epithets and a hostile work environment based on his sexual orientation.

In support of its arguments to dismiss the EEOC’s complaint, Scott Medical relied heavily on a prior Third Circuit case, Bibby v. Philadelphia Coca-Cola Bottling Co., which held that Title VII protections could not be extended to claims of discrimination based on sexual orientation. Despite this clear precedent, the court in Scott Medical stated that, “[i]ncremental changes have over time broadened the scope of Title VII’s protections of sex discrimination in the workplace” and “discrimination on the basis of sexual orientation is, at its very core, sex stereotyping plain and simple.” The court went on to say that “[t]here is no more obvious form of sex stereotyping than making a determination that a person should conform to heterosexuality.”

Judge Bissoon relied on the U.S. Supreme Court’s rationale in Price Waterhouse v. Hopkins, wherein the Supreme Court concluded that an employer who treats a woman differently on the basis of a belief that women should not be or cannot be aggressive, has engaged in sexual stereotyping and discrimination on the basis of gender. Judge Bissoon used this reasoning from Price Waterhouse to conclude that “discrimination on the basis of sexual orientation is a subset of sexual stereotyping and thus covered by Title VII’s prohibitions on discrimination ‘because of sex’.”

So, what happens now based on the court’s decision in Scott Medical Health Center? Well, initially the case will proceed toward trial and an appeal to the Third Circuit may be forthcoming in the future. If appealed, the Third Circuit will likely be faced with reconsidering its prior decision in Bibby and other similar cases. Likewise, other courts throughout the country will be considering this same issue in the near future as the EEOC continues to champion the theory that Title VII prohibits discrimination based on sexual orientation.

In the meantime, employers should take a hard look at their Equal Employment Opportunity and Anti-Harassment policies, and consider adding sexual orientation and gender identity as protected classes. In addition, employers will need to response appropriately in the event of a complaint alleging harassment based on sexual orientation. It may also be a good idea to update your management training on this topic.

Earlier in the year, we reported on a temporary injunction issued by a federal district court Judge in Texas.  The injunction prevented the Department of Labor from enforcing the so-called “persuader rule.”  The rule sought to require all employers, consultants, and lawyers to disclose and report labor relations services, including  fee arrangements and a description of the services provided to employers by attorneys and consultants.

After issuance of the temporary injunction, the federal government filed a motion to seeking to set aside the Judge’s order in an effort to clear the way for enforcement of the rule.  The National Federation of Independent Business, which sought the temporary injunction on behalf of employers, filed its own motion to make the injunction permanent.

On November 16, 2016, the Court denied the government’s motion and granted the National Federation of Independent Business’s, permanently prohibiting the federal government from enforcing the persuader rule.  This is a big win for employers everywhere as they will not face consequences for failing to disclose the labor relations advice given by their consultants and attorneys.

The government has appealed, but the Fifth Circuit is not expected to consider the case before the end of President Obama’s term in January.  It is expected that President-elect Trump’s administration will either reverse the persuader rule outright or allow it to die by withdrawing the appeal.  We will continue to monitor the issue and report any further developments here.