The Consolidated Appropriations Act, 2021 (“Act”), signed by President Trump on December 27, 2020, contains several provisions affecting employee benefits.   Here is what you should know:

Temporary Special Rules for Health and Dependent Care Flexible Spending Arrangements

Carryover from 2020 and 2021 Plan Years:  The Act permits plans to allow participants to carry over (under rules similar to the rules applicable to health flexible spending arrangements) all unused benefits or contributions remaining in any flexible spending arrangement in the 2020 and 2021 plan year to the plan years ending in 2021 and 2022, respectively.

Extension of Grace Periods:  The Act permits plans to extend the grace period for a plan year ending in 2020 or 2021 to 12 months after the end of such plan year, with respect to unused benefits or contributions remaining in a health flexible spending arrangement or a dependent care flexible spending arrangement.

Post Termination Reimbursement from Health FSAs:  The Act allows plans to permit an employee who ceases participation in the plan during calendar year 2020 or 2021 to continue to receive reimbursements from unused benefits or contributions through the end of the plan year in which such participation ceased.

Mid-Year Election Changes:  The Act permits plans to allow employees to prospectively change their health or dependent care flexible spending arrangement elections without a change in status at any time in 2021.

Special Disaster-Related Rules for Use of Retirement Funds

Similar to the COVID distributions, a 401(k) may allow “qualified disaster distributions” up to $100,000 that will not be subject to the 10% early withdrawal penalty.   The distribution applies to certain federal disasters declared between January 1, 2020 and February 25, 2021, but excludes COVID as a disaster.  The participant must have lived in the disaster zone and have been economically damaged by the disaster.   The distribution must be taken prior to June 25, 2021.  It is taxable pro rata over three years and may be recontributed within the three year period after the distribution.

If a participant had taken a hardship distribution in order to purchase a principal residence in a qualified disaster zone but did not use the funds because of the disaster, the participant may recontribute the funds prior to June 25, 2021.

The limit for loans made to participants living in a disaster zone and who have been economically damaged by the disaster has increased to the lower of $100,000 or 100% of the participant’s vested account balance.  Loan repayments scheduled for repayment during the disaster period and up to 180 days thereafter may be delayed for one year or June 25, 2021, if later, and the term of the loan may be extended in proportion to the delay.

Temporary Rule Preventing Partial Plan Termination

A partial plan termination is typically triggered if more than 20% of total plan participants are terminated in a particular year.  The Act provides that a plan will not be treated as having a partial termination during any plan year which includes the period beginning on March 13, 2020, and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021 is at least 80% of the number of active participants covered by the plan on March 13, 2020.

Multiemployer Plans Primarily Covering the Building and Construction Industry

The Act allows multiemployer plans primarily covering the building and construction industry to reduce the age for in-service distributions from 59 ½ to 55 in certain limited circumstances.

Coronavirus-related Distributions and Money Purchase Plans

Although participants may no longer request coronavirus related distributions, the Act retroactively applies the CARES Act coronavirus related distribution rules to money purchase pension plans, which were previously not eligible to make the distributions.

Excess Pension Asset Transfers

Currently, a pension plan may elect, under Section 420, to transfer excess pension assets over a designated period of time to fund certain retiree health and life insurance costs. If a plan has made such a qualified future transfer election, it may, prior to December 31, 2021, elect to prospectively terminate the transfer period that begins after the election.  In addition, any assets previously transferred to a health benefits account which are not used by the effective date of the election shall be returned to the pension plan.

Preventing Surprise Medical Bills

Beginning in 2022, the No Surprises Act prohibits health care providers and health insurance plans from imposing upon enrollees a greater cost-sharing for out-of-network emergency health services than that of the in-network cost-sharing. This would prevent what is commonly known as balance billing for these services, except in very limited circumstances.  Specifically, the participant’s cost-sharing may not be more than the in-network amount for services that are:

  • emergency services provided by an out-of-network provider or at an out-of-network facility;
  • nonemergency services provided at an in-network facility by an out-of-network provider;
  • nonemergency services provided out-of-network to an enrollee who initially enters through an emergency room for emergency services, except under specified circumstances; or
  • air ambulance services.

The plan may also not require prior authorization for these out-of-network services and may not impose any other conditions to coverage which are not imposed upon similar in-network providers.  The amounts paid by the participant must be applied toward the participant’s deductible and out-of-pocket limits.

Additionally, the Act establishes methods of determining the amount which the out-of-network provider or facility will be paid and requires the amount to be paid directly to the health care provider. The Act also establishes an independent review process to resolve billing disputes between insurance plans and providers.  These provisions generally apply to plan years beginning on or after January 1, 2022.

Choice of Health Care Professional

In other patient protections, if a group health plan, or a health insurance issuer requires or provides for designation of a participating primary care provider, then the plan or issuer will need to permit participants to designate any participating primary care provider who is available to accept the individual.

Transparency with Respect to Health Plans

Commencing with plan years beginning on or after January 1, 2022, health plans and health insurers must include on any plan or identification card, any deductible applicable to the plan, any out-of-pocket maximums, and a telephone number and website address where the individual may seek additional information.

Beginning in plan years starting on or after January 1, 2022, health plans and health insurers must offer price comparison guidance via telephone and provide an internet price comparison tool that allows participants to compare the amount of cost-sharing that the individual will be responsible for paying with respect to a specific item or service.

Also beginning in plan years starting on or after January 1, 2020, health plans and health insurers must also establish verification processes to verify the accuracy of information contained in provider directories. If a participant relies upon a provider directory which incorrectly listed the provider as participating, the plan may not impose upon the participant a cost-sharing amount greater than what would apply if the service was provided by a participating provider.

Health plans and health insurers that offer individual coverage can no longer enter into agreements with a service provider which restricts the health plan from providing provider specific costs or qualify of care information to others, restricts the health plan from electronically accessing de-identified claims and other information, or sharing such information with a business associate.

Effective December 27, 2021, health plans cannot enter into contracts with brokers or consultants wherein the broker or consultant expects to receive $1,000 or more in compensation, unless the service provider discloses a description of the services to be provided; a description of all direct and indirect compensation expected, a description of any arrangements with indirect payers, as well as other information.

Strengthening Parity in Mental Health and Substance Abuse Disorder Benefits

Group health plans and health insurers that provide medical and surgical benefits and mental health or substance abuse disorder benefits that impose nonquantitative treatment limitations (“NQTL”) on the mental health and substance abuse benefits must, beginning February 10, 2021,  perform a comparative analysis regarding the NQTLs and make it available to the appropriate State authority upon request. The analysis would include information such as the plan language regarding NQTLs, the factors to determine when the NQTLs will apply, and the comparative analysis demonstrating that the NQTLs are not applied more stringently to the mental health or substance abuse disorder benefits than to the medical and surgical benefits.

Reporting on Pharmacy Benefits and Drug Costs

Not later than December 27, 2021 and June 1st of each year thereafter, group health plans and group health insurers must provide the Departments of Labor, Treasury, and Health and Human Services with certain information regarding pharmacy benefits and drug costs incurred by the plan.  The information will include dates of the plan year, the number of participants, the 50 brand prescriptions for which the plan paid the most claims, the 50 most costly prescriptions drugs for which the plan paid claims, the 50 prescriptions with the greatest increase in plan expenditures over the plan year preceding the plan year that is subject to the report, total spending on health care services, premium information, information regarding rebates and other remuneration paid by drug manufacturers, and any reductions in premiums and out-of-pocket costs associated with rebates or fees from drug manufacturers.

Student Loans

Section 2206 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, expands the definition of educational assistance to include certain employer payments of student loans paid after March 27, 2020, and before January 1, 2021. The expansion allows the payment of up to $5,000 by an employer, whether paid to the employee or to a lender, of principal or interest on any qualified education loan incurred by the employee for the education of the employee to be exempt from taxation.  The Act extends the exclusion until January 1, 2026.

For more information on these changes and other employee benefit law changes, contact a member of our Labor and Employment or Employee Benefits Group.

For information on other COVID related topics, sign up for the Employee COVID-19 Lawsuits webinar here.

The U.S. Department of Labor (“DOL”) announced the issuance of a Final Rule to clarify the distinction between an employee and an independent contractor under the Fair Labor Standards Act (“FLSA”).

A worker’s classification under the FLSA determines their entitlement to minimum wage and overtime pay, and determines whether an employer is obligated to maintain certain records mandated by the FLSA. Misclassifying workers can lead to significant exposure for unpaid wages, unpaid taxes, and class action lawsuits. In other words, a worker’s classification is a big deal, and it ought to be carefully considered.

So, what exactly does the DOL’s Final Rule say?

The Final Rule codifies the “economic realities” test for distinguishing between an employee and an independent contractor. The question of “economic reality” generally asks whether the worker depends on a particular individual, business, or organization for work (thus, an employee) or whether the worker is in business for him- or herself (thus, an independent contractor).

The Final Rule identifies five distinct factors for evaluating a workers’ economic dependence. The first two “core factors” are most probative in answering the question of whether a worker is economically dependent on themselves or someone else. These factors are:

  • The nature and degree of control over the work
  • The worker’s opportunity for profit or loss based on initiative and/or investment

The nature and degree of control involves an analysis of which party exercises substantial control over key aspects of performing the work – things like scheduling work hours, selecting projects, and the ability to work for competitors. The second factor examines whether and to what extent a worker’s own initiatives or investments might increase their profits or cause them to incur losses. In other words, is a worker able to invest in new equipment and additional helpers to increase their earnings? If so, that would appear to be an independent contractor. On the other hand, if the worker is only able to affect their earnings by working faster or more hours, that factor would weigh in favor of classification as an employee.

The next three factors are:

  • The amount of skill required for the work
  • The degree of permanence of the working relationship between the worker and the potential employer
  • Whether the work is part of an integrated unit of production

No single factor is necessarily dispositive of a worker’s status, and the Final Rule notes that additional factors may be relevant in determining a worker’s status under the FLSA if the additional factors somehow indicate whether the worker is in business for him- or herself or whether they are economically dependent on the potential employer.

The primary focus of the overall inquiry is on the actual practice of the worker and the potential employer, and not necessarily on the terms of a contract or what may be theoretically possible between the parties. For example, if a worker’s agreement permits them to work for a competitor, but in reality, the worker is prevented from doing so, that contractual provision will hold less weight than the actual facts of the situation.

Now for the elephant in the room. The future of the Final Rule is uncertain at best. The Biden Administration takes the reins on January 20, 2021, and the Final Rule is not scheduled to take effect until March 8, 2021. The incoming Biden Administration has already vowed to block many of the Trump Administration’s “midnight regulations,” and this one could likely be included.

The President-Elect has on numerous occasions invoked what is known as the “ABC Test” for determining whether a worker is an employee. Unlike the “economic realities” test, the ABC Test generally presumes that a worker is an employee, and requires a business to satisfy each of three conditions to demonstrate that a worker is an independent contractor. These three conditions are (a) that the worker is free from the control and direction of the hirer in connection with the performance of the work (both under the contract and in fact), (b) that the worker performs work that is outside the usual course of the hiring entity’s business, and (c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

If and when the Final Rule goes into effect, employers should review their worker classifications based on the factors set forth in the Final Rule to ensure compliance with the new standard. We will continue to monitor the status of this Final Rule and any revisions or rescissions that may be made by the Biden Administration.

We will be hosting a webinar in February to discuss this issue, as well as employee/independent contractor classifications more broadly and how employers can prepare for changes we might expect to see over the next several months and years in this area.

After the country waited with anticipation for the better part of a year for a vaccine that would return us to some sense of normalcy, the FDA finally approved two vaccines in December.  The plan was to vaccinate frontline healthcare workers first – for obvious and understandable reasons.  It was also the plan that 20 million people would be vaccinated by the end of 2020.  As of today, vaccinations for frontline healthcare workers are progressing, but we are nowhere near the 20 million goal.  We are closer to 10 million.  At the same time, employers everywhere are trying to evaluate (1) what options they have, if any, when it comes to vaccination programs, (2) when can their employees get the vaccine, and (3) um, how is this going to work.  So, where are we and what’s next?

First, it appears that the vaccination rollout plan is about to change.  In recent weeks, the incoming Biden Administration has indicated that it will scrap the original rollout plan and immediately release all vaccine reserves in an attempt to vaccinate more people, faster.  Today, the Trump Administration has indicated that it will do the same, even in the last week of its Administration.  That means that the group of people eligible to receive vaccines is about to grow – hopefully substantially.

In Pennsylvania, the Department of Health has established a phased approach.  The frontline healthcare workers were Phase 1a.  Next is Phase 1b, which includes: people over 75; people in congregated settings; first responders; correctional officers; food and agricultural workers; manufacturing workers; grocery store workers; teachers; clergy; public transit workers; and workers in child and adult care facilities.  You can review the phases here: Vaccine (pa.gov).  Yesterday, Secretary of Health Dr. Rachel Levine hinted that the plan for implementing vaccines for people in Phase 1b is coming soon.  With the release of the reserve vaccines by the Trump and Biden Administrations, as well as Dr. Levine’s indication that the Phase 1b plan is coming, we should expect Phase 1b to roll out in the coming days and weeks.

Good news, but how do you get vaccines in the arms of your employees?  As employers look to next steps, this is the first question on top of their mind.  The exact parameters are not clear yet, and likely won’t be until Pennsylvania rolls out its formal plan for Phase 1b.  However, the Department of Health has suggested that Pennsylvania will utilize the CDC’s Vaccine Finder website. You can find that here: Vaccinefinder.  Through that site, individuals and employers can find where vaccines are available based on proximity to geographic location.  From there, individuals and employers can make appointments based on availability.  This does not include other initiatives that may be implemented, like 24-hour drive through vaccination in sporting facilities and large venues (like we have seen in other states, like Arizona).

Once employers satisfy themselves with the logistics of getting employees access to vaccines, the next question is: can you make it mandatory that all of your employees get vaccinated?  Yes, it is possible to make a vaccination program mandatory – but there are many traps for the unwary.  The vaccination program policy and the implementation of the program are critically important to avoid those traps, while ensuring that your workforce gets protected from the virus that has so ravaged our day-to-day lives.

If you would like to learn more about employers’ role in the vaccination process, McNees is hosting a webinar on January 20, 2021: The COVID-19 Vaccine – Guiding Your Workforce to the Light at the End of the Tunnel.  You can access the registration here.

On December 21, 2020, Congress passed a $900 billion coronavirus relief bill (“relief bill”) as part of a broader spending bill for fiscal year 2021.  President Trump signed the relief bill on December 27, 2020.  In anticipation of any coronavirus relief, employers and HR professionals have been asking whether Congress would extend mandatory paid leave under the Families First Coronavirus Response Act (“FFCRA”), which is set to end on December 31, 2020.  Congress did not.  Instead, under the relief bill, employers who voluntarily pay FFCRA leave through March 31, 2021, are eligible for tax credits associated with such leave.  Other highlights of the relief bill include extensions of certain unemployment compensation benefits and the employee retention tax credit, which had previously expired or were set to expire by December 31, 2020.

FFCRA Leave

As a reminder, the FFCRA requires employers with fewer than 500 employees to provide two forms of paid leave to their employees: (1) 80 hours of emergency paid sick leave (“EPSL”) to a full-time employee who is unable to work because of a qualifying reason related to COVID-19; and (2) 12 weeks of emergency family and medical leave (“EFML”) (of which at least the final 10 weeks are paid) to an employee who is unable to work because of child care needs related to COVID-19.  To offset the cost of such required paid leave, the FFCRA provides a tax credit for each form of leave.  The mandatory FFCRA leave and the associated tax credits expire on December 31, 2020.

The relief bill does not extend the mandatory FFCRA leave.  Therefore, employers are not required to provide FFCRA leave (either EPSL or EFML) after December 31, 2020.  However, the relief bill extends the tax credits to March 31, 2021.  As such, if an employer voluntarily provides either EPSL or EFML through March 31, 2021, the employer will be eligible for the tax credit associated with such leave.

We read the relief bill as permitting an employer to provide one form of leave (e.g., EPSL), but not the other (EFML), and still be eligible for the tax credit for such leave.  The tax credits for EPSL and EFML are governed by separate provisions, and neither is conditioned on whether the employer offers the other type of leave.  We also do not read the relief bill as providing a reset or additional leave to employees who have already exhausted their 80 hours of EPSL or 12 weeks of EFML.  Therefore, an employer can only take the tax credit for leave taken by those employees who have not already exhausted their EPSL and EFML leave allotments in 2020.

Now that the relief bill has become law, the DOL and/or the IRS may release updated guidance on the now-voluntary FFCRA leave.

Finally, although employers are no longer required to provide FFCRA leave after December 31, 2020, they may have PTO or other paid leave policies that are applicable.  In addition, employers must be aware of any state or local laws that mandate paid leave.

Unemployment Compensation

The relief bill extended several pandemic-related unemployment insurance benefits that were created by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).  First, it extends the Pandemic Unemployment Assistance (“PUA”) program, which provides unemployment assistance to individuals who are not eligible for regular unemployment compensation benefits, to March 14, 2021 (with a phaseout for certain individuals through April 5, 2021).  The relief bill also increases the duration of the PUA benefit from 39 weeks to 50 weeks.

Second, the relief bill provides a $300 federal pandemic unemployment compensation enhancement (the previous $600 enhancement expired on July 31, 2020).  Thus, individuals will receive their regular unemployment compensation benefit under state law, plus $300.  This enhancement ends on March 14, 2021.

Finally, the relief bill extends the Pandemic Emergency Unemployment Compensation (“PEUC”) benefit, which provides emergency unemployment compensation to individuals who have exhausted their regular benefits under state or federal law, to March 14, 2021 (with a phaseout for certain individuals through April 5, 2021).  The relief bill also increases the duration of the PEUC benefit from 13 weeks to 24 weeks.

Employee Retention Credit

The CARES Act created an employee retention tax credit for an employer whose business was closed due to a government order or suffered a significant decline in gross receipts, but who continued paying wages to its employees.  The credit was set to expire on December 31, 2020.  Among other things, the relief bill extends the credit through June 30, 2021; increases the amount of the credit; and decreases the reduction in gross receipts necessary to qualify for the credit.

If you have any questions about the latest coronavirus relief bill, including its effect on FFCRA leave, please contact an attorney in the McNees Labor and Employment Group.

Earlier this month, in the case of Hudnell v. Thomas Jefferson University Hospitals, District Court Judge Gerald Pappert denied Jefferson’s motion to dismiss Hudnell’s claims for violation of the Pennsylvania Medical Marijuana Act (“Act”), making him the second judge in Pennsylvania to uphold the right of a certified medical marijuana user to bring a cause of action for discrimination under the Act.

Hudnell was employed by Jefferson as a Security Analyst.  In 2018, she was certified to use medical marijuana – notably, by a Jefferson doctor – for intractable back pain.  Following a two month medical leave of absence, related to her back condition, Jefferson required a return to work drug test.  Though Ms. Hudnell produced a copy of her certification card in connection with the drug test, on October 11th,  the nurse administering the test commented that the card was expired.  Ms. Hudnell began the renewal process on August 22nd, but could not get an appointment with her certifying doctor until October 16.  When Ms. Hudnell’s drug test returned positive, Jefferson terminated her employment, noting that she did not have a valid medical marijuana card at the time of her drug test.  Though Ms. Hudnell’s doctor explained the certification process, explained that Ms. Hudnell could have obtained a 30-day supply of medical marijuana at anytime before her card expired on August 21st and that he would have expected any marijuana from that 30-day supply to be in her system in October, Jefferson nonetheless upheld the termination based on the status of her card on the day of the drug test.

Ms. Hudnell filed suit in the Eastern District of Pennsylvania, asserting, among other things, a claim for discrimination under the Pennsylvania Medical Marijuana Act.  In moving for dismissal of the MMA claim, Jefferson made two arguments: (1) that the MMA does not provide a private right of action; and/or (2) that Ms. Hudnell was not protected by the MMA because she did not possess a valid certification card at the time of her drug test.

Regarding the first argument, Judge Pappert noted the decision of the Lackawanna County Court of Common Pleas in Palmiter v. Commonwealth Health System, along with the decisions of courts in Rhode Island, Connecticut, Delaware and Arizona, each of which held that the anti-discrimination provision in the state medical marijuana act created an implied right of action.  In concurring with these five courts, Judge Pappert noted that to deny a right of action would cause the anti-discrimination provision in the Pennsylvania Act to “ring hollow.”

Regarding the second argument, Judge Pappert held that Ms. Hudnell alleged sufficient facts to give rise to a potential entitlement to relief.  Judge Pappert, without much comment, seemed to discount the argument that Ms. Hudnell was not technically a certified user on the date of her drug test.  Rather, he noted that she alleged sufficient facts to make a colorable claim for protection and relief under the Act.

While Judge Pappert’s decision regard the first argument is not surprising, his ruling on the second argument might raise a few eyebrows.  The Act clearly protects certified users and Ms. Hudnell was not, technically, a certified user at the time of the drug test that resulted in her termination.  So, does Judge Pappert’s decision open the door for discrimination by anyone alleging to use medical marijuana, regardless of whether they are certified under the Act?  Probably not.  It is doubtful that Judge Pappert’s ruling could be applied that broadly.  Rather, the specific facts of this case – that Ms. Hudnell had been certified, that Jefferson knew she was certified, the testimony of her doctor that the marijuana in her system likely was obtained legally and that she had commenced the process to re-certify – are all critical.  An individual who is beginning the certification process for the very first time likely would not be afforded the same protection as Ms. Hudnell.  It is also important to note that Judge Pappert only determined that Ms. Hudnell’s claim could move forward.  His decision does not mean that Ms. Hudnell can succeed on her claim.

The Hudnell decision is a reminder to employers that zero tolerance drug testing policies cannot be blindly applied to medical marijuana users.  We recommend that employers evaluate medical marijuana use by an applicant or employee, and the impact of use on continued employment, on a case by case basis.  Further, if you haven’t updated your zero tolerance drug testing policy to include possible exemptions for legal medical marijuana use, now may be the time to do so.

In what seems like an eternity ago, in June 2018, the Pennsylvania Department of Labor and Industry (DLI) proposed new regulations under the Pennsylvania Minimum Wage Act (PMWA) that would increase significantly the minimum salary requirement for the white-collar overtime exemptions under this law.

After many twists and turns, these regulations were published in their final form on October 3, 2020 and are now law in Pennsylvania. These regulations can be found here.

The PMWA is the state-law equivalent of the federal Fair Labor Standards Act (FLSA).  The PMWA’s requirements apply to essentially all employers in Pennsylvania.  The PMWA and FLSA both place minimum wage and overtime pay obligations on Pennsylvania employers.  While the laws’ requirements are similar, they are not identical.  Employers in Pennsylvania must meet the requirements of both laws to ensure compliance.  In areas where one law is more favorable to employees than the other, Pennsylvania employers must comply with the more employee-friendly requirements to avoid liability for unpaid minimum wages or overtime pay.

The DLI’s new overtime exemption regulations increase the minimum salary requirement for the PMWA’s white-collar overtime exemptions as follows:

  • $684 per week ($35,568 annually) on October 3, 2020 (note: this is the current level required by the FLSA and has been in effect since January 1, 2020);
  • $780 per week ($40,560 annually) on October 3, 2021; and
  • $875 per week ($45,500 annually) on October 3, 2022.

Starting in 2023, the salary threshold will adjust (i.e., increase) automatically to an amount equal to the 10th percentile of all Pennsylvania workers who work in salaried exempt positions.  If the automatic “adjustment” works as intended, those employees whose salaries are in the bottom 10% of salaried exempt employees in Pennsylvania will need to receive compensation increases to meet the new increased requirement and qualify for an exemption.

The new regulations also modify the duties tests for the PMWA’s white-collar overtime exemptions.  While these changes were purportedly designed to more closely track the FLSA’s companion exemptions, there are still differences between the overtime exemption tests under the FLSA and PMWA in a number of critical areas.

The new regulations incorporate the provision from the new FLSA regulations that would allow employers to meet up to 10% of the minimum salary amount with the payment of incentive compensation, non-discretionary bonuses, and/or commissions that are paid at least annually.

So what does this mean for Pennsylvania employers?  For the next year (i.e., until October 3, 2021), the white-collar exemptions’ minimum salary requirements under the PMWA and FLSA are the same.  That’s the good news.

Now for the rest of the news.  On October 3, 2021, the minimum salary requirements for the PMWA’s white-collar exemptions will increase significantly to $780 per week ($40,560 annually).  Thus, by October 3, 2021, any employee classified as exempt under a white-collar exemption that has a minimum salary requirement who earns less than that amount will need to receive a salary increase to at least meet this amount or be reclassified as non-exempt (and made eligible for overtime pay) going forward.  In addition, significant increases will also occur in 2022 and 2023.

Pennsylvania employers must ensure compliance with federal and state legal requirements for minimum wage and overtime exemption classifications or face the risks of non-compliance in the form of costly class-based litigation and government agency investigations.  Employers should be aware of the new increased minimum salary requirements that will take effect in October 2021 and beyond and ensure they have a strategy to address these requirements for affected employees.

If you have questions about how these changes might affect your business or your employees, please contact any member of the McNees Labor & Employment Practice Group.

The Department of Labor (“DOL”) issued revisions to its Temporary Rule implementing the Families First Coronavirus Response Act (“FFCRA”) on Friday, September 11, 2020 (the “Revised Temporary Rule”). The Revised Temporary Rule was issued in response to the decision by U.S. District Judge J. Paul Oetken of the Southern District of New York on August 3, 2020 (the “District Court Decision”), which had vacated portions of the DOL Temporary Regulations under the FFCRA (“The Original Temporary Rule”).  Our blog post explaining the District Court Decision is found here.

The Revised Temporary Rule is set to be published on September 16, 2020 and will become effective immediately.

By way of summary, The Revised Temporary Rule addresses the following issues:

  • DOL reaffirmed the requirement that FFCRA leave may only be taken if the employer has work available to the employee;
  • DOL reaffirmed that employees must obtain permission from their employer in order to take intermittent FFCRA leave (when applicable), and provided further explanation of what constitutes intermittent leave due to school closures;
  • DOL revised the definition of “health care provider” to mean that employers may exclude from FFCRA eligibility those employees who are employed to provide diagnostic services, preventive services, treatment services, or other services that are integrated with and necessary to the provision of patient care; and
  • DOL revised the notice and documentation requirements to clarify that employees must provide notice of their need for leave as soon as practicable, but not in advance

The Work-Availability Requirement

The Original Temporary Rule provided that FFCRA leave was not available to an employee whose employer did not have work available at the time of the leave, since the language of the FFCRA grants paid leave only to employees who are “unable to work (or telework) due to a need for leave because” of one of six qualifying reasons related to COVID-19.  The District Court Decision vacated the work availability requirement because it concluded that the language of the FFCRA could require either “but for” causation, or it could permit leave when the qualifying reason is one of several reasons why the employee is unable to work.  The District Court found that the DOL had not adequately explained the basis for its interpretation of the FFCRA as requiring but for causation.

The Revised Temporary Rule makes clear that an employee is not eligible for paid leave for any of the qualifying reasons, unless the employer would otherwise have work for the employee to perform. The DOL also provided a more robust explanation of its interpretation that the FFCRA requires that the qualifying reason is the but for cause of the inability to work, which should ensure that the work availability requirement survives future judicial scrutiny.

In this regard, the Revised Temporary Rule provides much-needed clarity, as after the District Court Decision was issued, employers were left to choose between providing FFCRA paid leave to employees with qualifying reasons for whom no work was available and risking that the corresponding tax credit would be denied, or denying the leave in such circumstances based upon the work availability requirement and risking an employee lawsuit.  It is now clear that FFCRA leave may not be taken if the employer has no work available for the employee for reasons unrelated to the qualifying reason.

Intermittent Leave

The Original Temporary Rule, (i) prohibited intermittent leave for on-site workers due to COVID-19 related illness, isolation or quarantine, and (ii) permitted intermittent leave for other qualifying reasons (such as COVID-19 related childcare) and for employees who can work remotely, but only if the employer agreed to permit the intermittent leave arrangement. The District Court Decision upheld the prohibition of intermittent leave for on-site workers due to illness, isolation or quarantine, but vacated the requirement that the employer consent to intermittent leave for other qualifying reasons based upon its conclusion that the DOL had not adequately explained the rationale for the employer consent requirement.

The Revised Temporary Rule reaffirms the DOL’s position that employer approval is needed to take any intermittent FFCRA leave, and further explains the basis for the approval requirement. Essentially, the Revised Temporary Rule notes that the DOL FMLA regulations require employer consent for intermittent FMLA leave for the birth or placement for adoption of a child, and explains the agency’s position that such employer consent is also appropriate in the context of applicable FFCRA intermittent leave, in order to avoid unduly disrupting the employer’s operations.

Unfortunately, the Revised Temporary Rule does not discuss the outcome in the event that the employer does not consent to intermittent leave under the FFCRA.  In the context of FMLA leave for the birth or placement for adoption of a child, the employee would have the option to take up to 12 weeks of continuous FMLA leave if the employer did not agree to permit intermittent leave.  However, it would seem inconsistent with the FFCRA for an employee who was only unable to work due to a qualifying reason intermittently, to be required to take continuous paid leave.  Therefore, it seems questionable that the employer would be entitled to the corresponding tax credit if continuous leave was made available under such circumstances.   Accordingly, we recommend that employers seek experienced employment law counsel prior to denying any request for intermittent FFCRA leave under circumstances where such leave could be permitted under the Revised Temporary Rule.

Given the variety of approaches taken by various schools this fall, it is significant to note that the DOL has taken the position that partial school closings actually constitute separate FFCRA qualifying events and are not intermittent leave situations that would require employer consent. The rulemaking includes the following discussion:

The employer-approval condition would not apply to employees who take FFCRA leave in full-day increments to care for their children whose schools are operating on an alternate day (or other hybrid-attendance) basis because such leave would not be intermittent under § 826.50. In an alternate day or other hybrid-attendance schedule implemented due to COVID-19, the school is physically closed with respect to certain students on particular days as determined and directed by the school, not the employee. . . .  For the purposes of the FFCRA, each day of school closure constitutes a separate reason for FFCRA leave that ends when the school opens the next day. The employee may take leave due to a school closure until that qualifying reason ends (i.e., the school opened the next day), and then take leave again when a new qualifying reason arises (i.e., school closes again the day after that). Under the FFCRA, intermittent leave is not needed because the school literally closes (as that term is used in the FFCRA and 29 CFR 826.20) and opens repeatedly. The same reasoning applies to longer and shorter alternating schedules, such as where the employee’s child attends in-person classes for half of each school day or where the employee’s child attends in-person classes every other week and the employee takes FFCRA leave to care for the child during the half-days or weeks in which the child does not attend classes in person. This is distinguished from the scenario where the school is closed for some period, and the employee wishes to take leave only for certain portions of that period for reasons other than the school’s in-person instruction schedule. Under these circumstances, the employee’s FFCRA leave is intermittent and would require his or her employer’s agreement.

Although the Revised Temporary Rule reaffirms that employer approval is needed to take FFCRA leave intermittently in situations in which intermittent FFCRA leave is permitted, the DOL has also made clear that the alternate day or other hybrid-attendance school schedules now in place in many schools actually qualify as separate brief periods of continuous leave.  Accordingly, in such circumstances, employers must allow eligible employees to take FFCRA leave if they are unable to work because they have to care for their child during the times that they are not permitted to attend school in-person.

Revised Definition of “Health Care Provider”

The FFCRA allows employers to exclude from FFCRA paid leave eligibility those employees who are “health care providers” or “emergency responders.” In concluding that the prior definition of “health care provider” was overly broad, the District Court found that for the purposes of defining a “health care provider” who could permissibly be excluded from FFCRA eligibility, the definition must depend on the “skills, role, duties, or capabilities” of the employee, not merely the identity of the employer. Otherwise, the term could include employees of health care facilities whose roles have nothing whatsoever to do with providing healthcare services.

In responding to the District Court Decision, the Revised Temporary Rule limits the definition to those employees who are “capable of providing health care services.” Specifically, the health care provider must be “employed to provide diagnostic services, preventive services, treatment services, or other services that are integrated with and necessary to the provision of patient care and, if not provided, would adversely impact patient care.” The Revised Temporary Rule’s definition also includes the definition of “health care provider” used under the FMLA.

The Revised Temporary Rule contains a list of three types of employees who may qualify as “health care providers.” First, it includes nurses, nurse assistants, medical technicians, and any other persons who directly provide diagnostic, preventive, treatment services, or other services that are integrated with and necessary to the provision of patient care. It also includes those employees providing those services under the supervision, order, or direction of or providing direct assistance to individuals providing those services. Third, it includes those employees who, although they do not directly interact with patients, their services are integrated into and necessary to providing health care services – such as lab technicians who process test results necessary for diagnoses and treatments.

By contrast, the Revised Temporary Rule identifies a non-exhaustive list of those individuals who are not health care providers – IT professionals, building maintenance staff, human resources personnel, cooks, food service workers, records managers, consultants, and billers. These individuals’ roles, though related to patient care, are too far attenuated to be integrated and necessary components of patient care.

Revising the Notice and Documentation Provision

The Revised Temporary Rule also revised the notice requirements to clarify that notice of the FFCRA’s Paid Sick Leave may not be required in advance. Rather, it may only be required after the first workday or portion of a workday for which the employee takes Paid Sick Leave. After that time, employers may require notice as soon as practicable.

With respect to the FFCRA’s expanded FMLA leave, notice is also required as soon as practicable. If the reason for leave is foreseeable, the Revised Temporary Rule states, “it will generally be practicable to provide notice prior to the need to take leave.” The DOL points out in the preamble to the Revised Temporary Rule that for normal FMLA leave, advance notice is typically required if the need for leave is foreseeable. Thus, although the Revised Temporary Rule does not expressly require advance notice for expanded FMLA leave under the FFCRA, it does so implicitly by codifying DOL’s position that advance notice is generally practicable if the need for leave is foreseeable.

In sum, although some questions are left unanswered, the Revised Temporary Rule clarifies many of the uncertainties left in the wake of the District Court Decision. It clarifies that employers need not provide FFCRA leave when no work is available to the employee for reasons unrelated to their need for FFCRA leave. It reaffirms that employer consent is required before employees take FFCRA leave intermittently in applicable scenarios. It simplifies the definition of “health care provider” employees who may be excluded from FFCRA coverage. Finally, it reaffirms that notice of the need for FFCRA leave, and documentation to substantiate the leave, must be provided as soon as practicable (but not necessarily in advance of the leave, unless practicable to do so).

Should you have any questions about how the Revised Temporary Rule may affect your Company’s FFCRA obligations, please contact any member of the McNees Labor & Employment Practice Group.

Accurately tracking hours worked by non-exempt employees for purposes of overtime pay has always been an area of potential risk for employers.  The issue is thorny one because of how the federal Fair Labor Standards Act (FLSA) defines what constitutes compensable hours worked for minimum wage and overtime pay purposes.  The risk is magnified significantly when non-exempt employees work remotely and/or have access to their work e-mail and network resources outside their scheduled work hours.

An unprecedented number of employees currently are working remotely due to COVID-19, making this issue and this risk more relevant than ever.  Earlier this week, the U.S. Department of Labor (DOL) issued a Field Assistance Bulletin (FAB) [https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/fab_2020_5.pdf] reaffirming employers’ wage and hour responsibilities for non-exempt employees working remotely due to COVID-19 or otherwise.  The FAB does not change existing legal requirements for employers.  However, it highlights this key issue and provides useful guidance for compliance.

Contrary to a common misconception and perhaps common sense, the FLSA does not require employers to track and pay for only those hours worked by non-exempt employees that the employer scheduled or otherwise directed the employee to work.  Instead, for minimum wage and overtime pay purposes, the FLSA requires employers to track and pay for all time that it “suffers or permits” the employee to work.  If the employer knew or had reason to believe that work is being performed by the employee, the time must be counted as hours worked, even if the employee was not directed to work at that time, and even if the employee was expressly directed NOT to work at that time.

For employees who can perform their job duties only at the employer’s physical location, this requirement typically does not present a problem.  However, in a remote work situation where employees can access their work e-mail, phone, and/or computer network 24/7, the opportunity exists for employees to work “off-the-clock,” creating risk of unpaid overtime and even the potential for class-based claims.

Employers are required to exercise control to ensure that work is not performed that they do not wish to be performed.  In its recent FAB, the DOL explained that “[a]n employer may have actual or constructive knowledge of additional unscheduled hours worked by their employees, and courts consider whether the employer should have acquired knowledge of such hours worked through reasonable diligence.”

To meet this requirement, employers should provide “a reasonable reporting procedure for nonscheduled time and then [compensate] employees for all reported hours of work, even hours not requested by the employer.”  The FAB confirms that employers need not compensate employees for hours worked that they do not know about and have no reason to know about.

The FAB clarifies that employers not necessarily required to cross-reference employees’ phone records or other non-payroll records to determine whether employees have worked outside scheduled work hours.  However, in a situation where a non-exempt employee is sending e-mails to his/her immediate supervisor outside the employee’s reported work hours, it would be difficult for the employer to maintain that it did not and should not have known that the employee was performing work off-the-clock.

Takeaways

Employers with non-exempt employees working remotely should take a number of steps to minimize the risk of unpaid overtime claims.

  • Have and disseminate a time-recording policy that sets forth how non-exempt employees are to report their hours worked and makes clear that non-exempt employees (1) must record all hours worked, (2) should not work outside their scheduled work hours without prior authorization from management, and (3) must report any hours worked, even those worked without prior authorization.
  • Ensure that management is aware of the risks presented in this area and the need to monitor compliance, particularly with respect to e-mails and calls received outside of a non-exempt employee’s scheduled work hours.
  • Address employees who fail to comply with these expectations, through counseling and even disciplinary action if the employee continues to fail to comply. But, do not refuse to pay the employee for unauthorized work.
  • Make compliance with these expectations part of your workplace culture. Giving non-exempt employees the “freedom” to complete their job responsibilities remotely on their own schedule may seem like a positive thing to do from an employee relations/culture perspective, but doing so creates potential liability unless the employer is accurately tracking and paying for the work hours.

If you have any questions about managing hours of remote employees or best practices for updating your company’s policies, please contact any member of the McNees Labor & Employment Group.

On Monday, August 3, 2020, U.S District Judge J. Paul Oetken of the Southern District of New York issued a Decision and Order striking down portions of the Department of Labor (“DOL”) regulations implementing the Families First Coronavirus Response Act (“FFCRA”). Particularly, the order vacated the following portions of the DOL regulations:

  • The requirement that work is available to the employee as a condition of eligibility for FFCRA leave;
  • the definition of “health care provider”;
  • the requirement that an employee secure employer consent for intermittent leave; and
  • the requirement that an employee provide documentation prior to taking FFCRA leave.

The Work-Availability Requirement

The Court first held that the DOL exceeded its rulemaking authority by excluding from eligibility those   employees for whom an employer does not have work available. The FFCRA grants paid leave to employees who are “unable to work (or telework) due to a need for leave because” of any one of six qualifying reasons related to COVID-19.  However, the DOL regulations provided that FFCRA leave was not available to an employee whose employer did not have work available at the time of the leave.  For example, if the employer conducted a temporary furlough due to a government shelter-in-place order or a lack of business, the DOL took the position that FFCRA leave would not be available.  In doing so, the DOL required that the FFCRA qualifying reason was the “but-for” cause of the employee’s inability to work – if the employee would not have had employment available, even in the absence of the qualifying reason, then “but-for” causation did not exist.

The Court found that the language of the FFCRA making leave available when the employee is “unable to work (or telework) . . . ‘because of’” a qualifying reason is ambiguous, since it could require “but for” causation, or it could permit leave when the qualifying reason is one of several reasons why the employee is unable to work.  Even though the Court seemed to acknowledge that the interpretation chosen by the DOL was a plausible interpretation of the statutory language, it struck down the DOL’s interpretation, finding that the agency had failed to adequately explain the basis for its interpretation during the rulemaking process.

Health Care Provider Definition

The FFCRA granted the DOL the authority to issue regulations permitting employers to exclude “health care providers” and emergency responders from the definition of employee under the FFCRA.  Although, for other purposes, the regulations incorporate the FMLA’s definition of health care provider (i.e., doctors and others who provide health care services), the DOL regulations defined health care provider for purposes of the exclusion from coverage to include anyone employed at any doctor’s office, hospital, nursing facility, retirement facility, medical school, medical testing laboratory, pharmacy, or any similar site where medical services are performed.

The Court held that the FFCRA’s statutory language requires that the healthcare provider exclusion is limited to employees who are capable of furnishing healthcare services, and that the definition in the DOL regulations was “vastly overbroad,” because it included “employees whose roles bear no nexus whatsoever to the provision of healthcare services.”  The Court noted that “an English professor, librarian, or cafeteria manager at a university with a medical school” would all be health care providers under the DOL regulation, and that such a result was inconsistent with the FFCRA.

Intermittent Leave

On the issue of intermittent leave, the Court first noted that the FFCRA did not address intermittent leave at all, and that the DOL’s regulatory powers permit the agency to fill the gap left by Congress through reasonable rulemaking, as necessary to carry out the purposes of the Act.  The Court upheld the DOL regulations insofar as they prohibit intermittent leave for on-site workers due to COVID-19 related illness, isolation or quarantine, because the prohibition of intermittent leave in those cases serves an important public health objective – reducing the risk of viral infection.

The DOL regulations permit intermittent leave for other qualifying reasons (such as COVID-19 related childcare) and for employees who can work remotely, but only if the employer and the employee agree to an intermittent leave arrangement. The Court held that the DOL had failed to offer any rationale for the requirement of employer consent to such intermittent leave and, therefore, vacated the DOL regulation insofar as it requires employer consent before an employee may take intermittent leave.

Documentation Requirements

Finally, the Court vacated the portion of the regulations imposing a requirement to provide documentation containing information about the need for leave prior to taking paid leave under the FFCRA. The Court found this requirement is inconsistent with the statute’s unambiguous notice provisions, neither of which require that documentation be provided by an employee in advance of taking paid leave under the FFCRA. Notably, however, the Court held that the documentation requirements are invalid only to the extent that they are a precondition to obtaining leave. The Court allowed the substance of the DOL’s documentation requirements to stand. In other words, employees still must provide the same documentation of the need for leave under the FFCRA, but they simply cannot be required to provide it in advance.

Conclusion

The Court’s decision modifies the DOL regulations by vacating those provisions discussed above.   The decision could have significant ramifications for employees who experience a qualifying reason for FFCRA leave, but are on temporary furlough for other reasons; for workers in the healthcare field; and for those who want to take intermittent leave for reasons permitted under the regulations.  However, the ruling does not include a nationwide injunction, so it leaves open the possibility that other courts might uphold the regulations.  To say the least, the decision creates significant uncertainty as to the validity of the portions of the regulations that have been vacated.  The DOL might also appeal the Court’s ruling, or the agency could engage in a new rulemaking to bolster its justification for those portions of the regulations that the Court found to be lacking support.

For now, employers who rely upon those portions of the DOL regulations that were vacated by the ruling will risk violating the FFCRA if courts within their jurisdiction eventually agree with Judge Oetken’s decision.  As such, pending further developments, we recommend that employers modify their FFCRA compliance processes to comply with the Court’s decision.

Should you have any questions or concerns about the impact of this decision on employer obligations, please contact any member of the McNees Labor & Employment Practice Group.

The National Labor Relations Board has restored a prior standard, one that had stood for about 80 years before being overturned in 2016, which governs an employer’s duty to bargain over employee discipline during the time period between when a new union is certified and a first contract is negotiated.  In 800 River Road Operating Company, LLC d/b/a Care One at New Milford, 369 NLRB No. 109 (2020), the Board reinstated the rule that employers have no duty to bargain before imposing discretionary discipline, which is consistent with the employer’s existing policy or practice, prior to bargaining a first contract with a newly certified union.

In reaching this conclusion in 800 River Road, the Board reversed its 2016 decision in Total Security Management Illinois 1, LLC, 364 NLRB No. 106 (2016), which had required employers to bargain over employee disciplinary action upon commencement of a collective-bargaining relationship.  Specifically, Total Security required employers to provide a new union with notice and opportunity to bargain regarding the discretionary aspects of an existing disciplinary policy before issuing “serious discipline” to a bargaining unit employee.

In reversing Total Security, the Board was fairly critical of its holding.  The Board noted that the decision was inconsistent with United States Supreme Court and Board precedent, and created a “complicated and burdensome” scheme that was inconsistent with the general body of law surrounding bargaining practices.

Although the 800 River Road decision will be applicable to a limited number of cases, it is important for employers who have recently been forced to bargain with a new union.  It will allow those employers to continue to implement existing disciplinary policies and procedures consistently and without the need to bargain.  Also, the Board announced that its 800 River Road decision would be applied retroactively.