The Department of Labor recently issued FAQs addressing basic questions regarding the American Rescue Plan Act’s requirement that employers and health plans subsidize COBRA between April 1, 2021 and September 30, 2021 for assistance eligible individuals.  In addition, the Department issued model notices which are required to be provided to certain former employees. The General Notice and Election Notice are to be used by employers who are subject to federal COBRA.  The Alternative Notice is to be used for employers which are not subject to federal COBRA but which are subject to a state’s mini-COBRA provisions.

Below are the relevant links.

For more information on recent changes in employment law, plan to attend the McNees 2021 Labor & Employment Seminar to be held virtually on June 10th and 11th.  Topics will include:

  • Diversity, Equity and Inclusion Fundamentals for HR Professionals
  • 2020: The Year Best Suited for the Rear View
  • Workplace Safety: In the Era of COVID and Medical Marijuana
  • Biden’s Labor Board: What’s On the Agenda (Again)?

By Adam Santucci & Conner Porterfield.  Conner is a third-year law student at Rutgers University School of Law with an expected graduation date of May 2021. 

In the recent decision of Commonwealth v. Mason, the Pennsylvania Supreme Court held that a nanny did not have a reasonable expectation of privacy while working inside the home of her employer.  Thus, the employer’s decision to video and audio record her in their home was not a violation of the Pennsylvania Wiretapping and Electronic Surveillance Control Act (Wiretap Act).  This decision reversed both the trial court and PA Superior Court’s holding that the nanny enjoyed a reasonable expectation that her verbal communications were not subject to recording while performing her nanny duties. This decision offers helpful guidance to Pennsylvania employers outside of the domestic employment context as well.

In Pennsylvania, intercepting and recording oral communications without all parties’ consent violates the Wiretap Act if the parties have a reasonable expectation that they are not being recorded.  Violators may be subject to criminal prosecution and claims for civil damages.  To establish a prima facie Wiretap Act violation, it must be proven that “(1) the complainant engaged in communication; (2) the complainant possessed an expectation that the communication would not be intercepted; (3) the complainant was justifiable under the circumstances; and (4) that the defendant attempted to, or successfully intercepted the communication.” Agnew v. Dupler, 717 A.2d 519, 522 (Pa. 1998).

Pennsylvania courts have previously held that video recording, without audio, does not violate the Act (with some exceptions, such as restrooms and locker rooms).  In addition, the courts have held that recorded conversations in open office spaces do not violate the Wiretap Act, because employees did not have a reasonable expectation of privacy in such an environment. Additionally, PA courts have held that there is no reasonable expectation of privacy in the workplace when individuals are taking notes during a recorded conversation. But, as the Court in Mason reminded us, whether a recording violates the Wiretap Act is a highly fact specific question that must be determined on a case-by-case basis.

In finding no violation of the Wiretap Act, the PA Supreme Court reasoned that parental video surveillance of children’s rooms is so common that it has led to the phrase “nanny cam.”  The court noted that parents frequently install monitoring devices to observe domestic workers employed within their homes. Therefore, in Mason, the nanny’s expectation of privacy within her employer’s home was unreasonable, because nanny cams are essentially ubiquitous.

Mason suggests, at least for electronic monitoring purposes, that domestic workers are subject to employer video and audio monitoring throughout most of the home.  It is likely that the decision applies not only to nannies, but also others employed in the home as well, such as cleaning persons.  The majority’s opinion suggests that the decision could reduce employee’s expectations of privacy in other non-residence workplaces as well.

While the holding in Mason is limited to domestic workers, it does provide some helpful guidance to employers generally.  First, it offers a reminder that video recording, without audio recording, is generally lawful.  Second, it reminds us of the requirements of the Wiretap Act and how recording issues can impact the workplace.  Employers must keep in mind that violations of the Wiretap Act can result in third-degree felony charges.  Employees may also file a civil claim and recover actual damages, punitive damages, and incurred litigation costs.  With such risks, it is always wise for employers to seek legal counsel before recording employee communications in the workplace.  Developing appropriate policies and issuing guidance to employees on your audio and video recording practices is also recommended.

The American Rescue Plan Act of 2021 (the “Act”) was signed into law on March 11, 2021.  As well as providing extended unemployment, the Act provides for subsidized COBRA, an increase in the amount of dependent care assistance permitted, continued and expanded credit for paid sick and family leave, and assistance for certain single and multiemployer pension plans.

Dependent Care Assistance Plan

The Act increases the amount an employee can exclude from the employee’s income and contribute to a dependent care assistance plan from $5,000 to $10,500 for the year 2021 only.

COBRA

Both private sector employers who are required to provide COBRA and governmental employers who are required to provide “public COBRA” under the Public Health Services Act must fully subsidize COBRA premiums from April 1, 2021 until the earlier of (i) September 30, 2021, (ii) the date following the expiration of the maximum period of continuation coverage required under COBRA, or (iii) the date the former employee becomes eligible for coverage under any other group health plan.  Employers must subsidize the payments for any employee who lost coverage because the employee was involuntarily terminated (other than for gross misconduct) or had a reduction in hours.  Employees who voluntarily terminated employment are not eligible.  The eligible employees would include those who elected COBRA and are still in their coverage period and those who did not elect COBRA or those who terminated their COBRA election and who would still be in their coverage period if they had elected or not terminated COBRA.

Employers will receive a credit against their quarterly Medicare Tax payments for the payment of the subsidy.  If the plan is a multiemployer plan, the plan will be responsible for the payment of the subsidiary and will receive a credit on its Medicare Tax liability.   To the extent that the amount of the subsidies exceeds the Medicare Tax liability, the employer will receive a refund.

Employers must provide three notices to eligible former employees notifying them of the premium subsidy, the extended opportunity to elect coverage, and when the premium subsidy will be terminated.

In addition, employers may, at their option, allow former employees who are currently electing COBRA to elect coverage under a different plan offered by the employer as long as (i) the premium for the new coverage does not exceed the premium for the current coverage, (ii) the new coverage is not an excepted benefit, a QSEHRA, or a FSA, and (iii) the employee did not voluntarily terminate employment.

Credit for Paid Sick Leave and Paid Family Medical Leave

The Act expanded the time period in which an employer may receive a tax credit for voluntarily providing paid sick leave and paid family medical leave in certain circumstances.  The tax credit is equal to 100% of the qualified sick leave and family medical leave wages and it is applied against the employer’s quarterly taxes.  The Act retains the $200 and $511 a day limitation depending upon the reason of the leave.  The Act also expands the leave to include (1) the seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 and (a) such employee has been exposed to COVID-19  or (b) the employee’s employer has requested such test or diagnosis, or (2) the employee is obtaining immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to such immunization.

Single Pension Plan

For purposes of the underfunded single employer plan, it will extend the amortization period from 7 years to 15 and make changes to the interest rate stabilization provisions.

Multiemployer Pension Plan

The Act temporarily delays the designation of endangered, critical, and critical and declining status of multiemployer pension plans.  For plan years between March 1, 2020 and February 28, 2021, a multiemployer pension plan may maintain their status from the prior plan year.  In addition, a multiemployer plan which is in endangered or critical status for a plan year beginning in 2020 or 2021 will have their funding improvement period or rehabilitation period extended for five years.

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

The United States House of Representatives has passed the PRO Act, which now moves to the Senate for consideration.  If passed, the PRO Act would probably be the most radical, and union friendly, change to U.S. labor law since the passage of the National Labor Relations Act (Act)  in 1935. And it is keeping us awake at night!

The PRO Act contains about 20 separate proposed modifications to the Act. Many of the changes would codify decisional law adopted by the National Labor Relations Board during the Obama administration.  The Obama Board was viewed by many as the most union and employee friendly Board in history.  A slew of Obama era decisions were reversed by the Trump Board.

However, if the PRO Act is passed, the following would become law:

  • Browning Ferris decision expanding the joint employer test
  • Specialty Healthcare decision allowing micro-units
  • Purple Communications decision allowing employees to use the employer’s email system for union organizing efforts
  • ABC test for determining independent contractor status, which is much more narrow than current test

But wait, there is more, the PRO Act would also:

  • Require interest arbitration if the parties could not reach terms for a new collective bargaining agreement (this is a huge change and its consequences and negative repercussions are hard to fathom)
  • Ban individual arbitration requirements and mandatory arbitration agreements
  • Bring back the “Quickie” or Ambush election rules
  • Require employers to post a notice of employee rights under the NLRA
  • Prohibit employers from permanently replacing striking workers
  • Allow secondary boycotts
  • Establish a private cause of action for violations of the NLRA
  • Provide for individual liability for managers and executives who commit unfair labor practices

Some of these changes are fundamental reversals of long-standing labor law that would significantly upset the balance of power between employers and labor unions.  We simply cannot overstate how significant these changes would be for employers.

But there is still more!  Perhaps the most devastating change to be wrought by the PRO Act would be the elimination of “Right to Work” laws.  A majority of states in the U.S. have adopted laws that prohibit an employer and a labor union from requiring to compulsory union membership.  In other words, under state law, employees cannot be forced to pay union dues.  The PRO Act would make such laws illegal, and thus, employees could be forced to pay union dues nation-wide.

Any guesses who would benefit the most from that change?

While we are hopeful that the PRO Act dies in the Senate, it is very possible that it will pass or some modified version of it will eventually pass.  What does that mean for employers?  Well, now is the time for non-unionized employers wishing to stay that way to adopt proactive strategies to remain union free.  Unionized employers should also take steps now to evaluate the impact of the PRO Act on collective bargaining strategy, policies, and practices.

For union and non-union employers, thought should be given to worker classification and supervisor and manager training.  The time to be proactive is now, and that is another reason we are not getting any sleep!

The answer to this question is . . . it depends.  Based on three recent court decisions, whether the Pennsylvania Human Relations Act (“PHRA”) protects medical marijuana (“MMJ”) users from discrimination on the basis of their current use of MMJ appears to depend on the specific accommodation requested by the user.  We summarize these key decisions and provide important take-aways for Pennsylvania employers below.

Harrisburg Area Community College v. Pennsylvania Human Relations Commission, (Pa. Commw. Ct., October 29, 2020)

In the HACC case, a nursing student (“Swope”) alleged that she suffered from PTSD and irritable bowel syndrome and that, with accommodation, she could meet the requirements of HACC’s nursing program.  The accommodation Swope requested was, “being permitted to take her legally prescribed medical marijuana.”  HACC required nursing students to submit to an annual drug test.  Anyone who tested positive would be removed from the program.  When HACC refused to waive the policy, Swope filed claims under the PHRA, alleging that HACC failed to accommodate her disability.

HACC moved for dismissal, arguing that the definition of “disability” in the PHRA excludes current users of “controlled substances.”  The PHRA references the federal definition of controlled substance.  Under federal law, marijuana is an illegal controlled substance.  HACC noted that the legislature did not amend the PHRA either via the Pennsylvania Medical Marijuana Act (“MMA”) or after passing the MMA and, therefore, despite legalization for medicinal use in Pennsylvania, the PHRA does not require accommodation of medicinal marijuana use.  The Pennsylvania Human Relations Commission (“PHRC”), which took up the case on Swope’s behalf, argued that Swope’s use of marijuana was legal under Pennsylvania law and, therefore, she should be protected by the PHRA.

Ultimately, the Commonwealth Court agreed with HACC, holding that the PHRA’s definition of disability did not include current use of a controlled substance as defined by federal law.  Highlighting the provisions in the MMA discussing use of medical marijuana by employees, the Court also held that the accommodation requested by Swope – continued use of medical marijuana – was not reasonable. First, the Court noted that the MMA provides that “employers are not required to provide an accommodation for use of medical marijuana to employees on [the employer’s] premises.”  Second, the Court discussed the safety sensitive carve out in the MMA, noting that “users of medical marijuana may be prohibited by an employer from performing any duty which could result in a public health or safety risk while under the influence of medical marijuana.”  According to the Court, allowing a nurse to work while under the influence of medical marijuana could result in a public health or safety risk.  Although the case did not involve an employment relationship, in citing these provisions of the MMA, the Court signaled that the same outcome could apply to employees.

Note – The PHRC applied for reargument, which the Court denied.  The PHRC did not appeal.

Palmiter v. Commonwealth Hospital Systems, Inc., (Pa. C.C.P. Lackawanna Cty, November 10, 2020)

We discussed the facts of the Palmiter case in 2019, as it was the first court decision in Pennsylvania to address the discrimination clause in the MMA.  In a second decision in the case, the court addressed Palmiter’s claim that her termination constituted disability discrimination in violation of the PHRA.   In the analysis of Palmiter’s PHRA disability claim, the Court noted that Palmiter did not plead that her underlying medical conditions were disabilities.  Rather, she asserted that her use of medical marijuana was a protected disability under the PHRA.  Consistent with the Commonwealth Court’s decision in the HACC case, the Court held that, based upon principles of statutory construction, the current use of medical marijuana under the MMA does not constitute a protected “disability” under the PHRA. Consequently, her claims under the PHRA for disability discrimination, failure to accommodate and retaliation failed.  Palmiter subsequently filed an appeal from the dismissal of her PHRA claims, which is currently pending before the Superior Court of Pennsylvania, leaving open the question of whether the Superior Court will give deference to the Commonwealth Court’s holding in HACC.

Hudnell v. Thomas Jefferson Univ. Hosps., Inc., (U.S. Dist. Ct., E.D. Pa., January 7, 2021).

A federal court decision earlier this year distinguished both HACC and Palmiter.

We discussed the facts of Hudnell last year when the court, referencing the first Palmiter decision, upheld a private right of action under the MMA’s discrimination provision.  Earlier this year, the court addressed Hudnell’s claims that her employer violated the PHRA by failing to accommodate her disability and terminating her in retaliation for requesting accommodation.  Citing Palmiter and HACC, the Hospital moved for dismissal arguing that Hudnell failed to plead a valid disability under the PHRA due to her marijuana use.  Judge Pappert disagreed.

Judge Pappert distinguished Palmiter, noting that Palmiter alleged that her legal use of medical marijuana qualified as a disability under the PHRA.  Hudnell, however, alleged that her disabilities included a herniated disk and related spinal injuries and that she requested accommodation for such disabilities.  Further, Hudnell alleged that she requested several accommodations, in addition to the accommodation of her medical marijuana use and that the hospital previously provided accommodation for her disabilities, but following her positive drug test, the Hospital failed to engage in the interactive process.  This allegation also allowed Judge Pappert to distinguish the HACC holding, which he noted held that HACC was not required to accommodate use of medical marijuana.  However, according to Judge Pappert, the Hospital had an obligation to engage in the interactive process with Hudnell to explore the reasonableness of other accommodations, which it apparently failed to do and thus her failure to accommodate claim could proceed.

Regarding Hudnell’s claim for retaliation, Judge Pappert once again distinguished her use of medical marijuana from her protected activity – her request for accommodation.  While she asked the Hospital to accept her legal use of marijuana, she asked for alternative accommodations as well.  Though he found the request for alternative accommodations significant, Judge Pappert also noted that a retaliation claim “[does] not require a plaintiff to provide he or she has an actual disability, rather, a plaintiff need only show that he or she requested an accommodation in good faith.”  Accordingly, it did not matter that Hudnell may not be an individual with a disability, because of her medical marijuana use.  She could nonetheless state a claim for retaliation.

Take-Aways for Employers

While the decisions in the above-three cases may appear to conflict, they actually provide helpful guidance and reminders for Pennsylvania employers.

First, regardless of whether the employee has a claim under the PHRA, the MMA creates a private right of action for any employee who believes he/she was discriminated against because of his/her status as a certified user of medical marijuana.  In the first decisions issued in Palmiter and Hudnell, the court allowed the plaintiff to proceed on a claim for discrimination in violation of the MMA.  Accordingly, employers must be mindful of the anti-discrimination language contained in the MMA and carefully consider how it plans to approach employee medical marijuana use.

Second, whether an employee can raise a claim under the PHRA will truly depend upon how the employee approaches the medical marijuana discussion with the employer and, subsequently, how the employee pleads his/her case.  The death knell in Palmiter was that Ms. Palmiter alleged that her use of medical marijuana qualified as a disability.  Conversely in Hudnell, the plaintiff sought accommodation for her underlying disability, of which her employer was aware and, indeed, previously accommodated.  In filing her claim, Hudnell then smartly argued that she was disabled by virtue of her medical condition and not due to her use of medical marijuana.  Accordingly, employers would be wise to remember that the myriad of conditions for which an individual may use medical marijuana, could qualify as disabilities and, as a best practice, should engage in the interactive process with any applicant or employee who seeks accommodation for these disabilities.

Finally, the accommodation requested by the employee is critical.  In both Palmiter and HACC, the requested accommodation was that the individual be allowed to continue using medical marijuana.  Specifically, in HACC, Swope asked HACC to waive its drug testing requirement and to place her into a clinical position despite the fact that she would continue using medical marijuana.  The holding of the HACC court, that such an accommodation is unreasonable, does not appear to have been disturbed by the court in Hudnell.  However, where an employee requests alternative accommodations or where alternative accommodations – again for the underlying disability – could be provided, the Hudnell decision tells us that the employer has an obligation to engage in the interactive process and consider the alternatives.  Employers should also be mindful of the potential for a retaliation claim when an employee makes any good faith request for an accommodation, even if the requested accommodation is not reasonable.  If the ultimate outcome is termination of employment, the employer should be prepared to provide a legitimate, non-retaliatory reason for the termination.

The bottom line is that the rights of employees who use medical marijuana remains somewhat unsettled.  A rigid “one size fits all” approach – i.e. a blanket zero tolerance policy –may result in a lawsuit.  Employers are cautioned to remember the interactive process, review and revise outdated policies now and, whenever questions arise, to consult counsel.

Should you have additional concerns about medical marijuana use by employees, wish to review or discuss your drug testing and drug free workplace policies or have specific questions, please reach out to Denise Elliott, Ursula Siverling or another member of the Labor and Employment Group.

On February 22, 2021, New Jersey Governor Phil Murphy signed three bills that legalize the use of cannabis for those over the age of 21, decriminalize possession of less than six ounces of cannabis and establish civil penalties for use by anyone under age 21.  The bills are the enabling legislation following a constitutional amendment approved by voters in November.  Notably, because the right to use cannabis is now constitutionally protected in New Jersey, legislators were charged with balancing the constitutional right to use with other conflicting interests, such as those of employers who want to prohibit drug use in an effort to ensure a safe and accident-free workplace.

Effective immediately, it is legal to use and possess cannabis in New Jersey.  As a practical matter, however, unless you have a medical marijuana card, you cannot yet purchase cannabis in New Jersey.  Before the state’s cannabis marketplace can become operational, Governor Murphy must establish and appoint the members of the Cannabis Regulatory Commission (the “Commission”).  Once formed, the Commission has up to six months to set its rules and regulations.  Only thereafter, will it begin accepting applications for recreational dispensaries.  The Commission is also expected to set rules and regulations that clarify provisions in the law regarding cannabis use and employment.

In 2019, New Jersey passed regulations that provided employment protections for medical marijuana users.  We discussed the protections in a July 2019 Blog Post.  Now, with the legalization of recreational cannabis, New Jersey employees who choose to use cannabis have even more protection.

Under the new law, employers may not refuse to hire, discharge from employment, or take any other adverse action against an employee because the employee uses cannabis off duty.  While employers may continue to test for cannabis metabolites, employees cannot be subject to adverse action based solely on the presence of such metabolites in the testing specimen.  Further, the law sets forth the circumstances under which an employer may test for cannabis.  Employees can be tested if there is reasonable suspicion that an employee is using cannabis while working, if there are observable signs of intoxication or following a work-related accident subject to investigation by the employer.  Tests may also be performed randomly, as part of a pre-employment screening or as part of routine screening of current employees when the purpose is to determine use during an employee’s work hours.  However, the law goes onto state that the “test shall include scientifically reliable objective testing methods and procedures, such as testing of blood, urine, or saliva and a physical evaluation in order to determine an employee’s state of impairment.”  The required physical evaluation must be conducted by “an individual with the necessary certification to opine on the employee’s state of impairment, or lack thereof.”  If the test and evaluation demonstrate impairment, the employer may discipline or terminate the employee.

Regarding the physical examination and recognizing impairment in employees, the law contemplates that this will be conducted by a Workplace Impairment Recognition Expert (“WIRE”).  The Commission, which as noted above, is not yet formed, is tasked with prescribing the standards and curriculum for WIRE certification.  WIRE certification can be issued to full or part-time employees of the employer or to anyone contracted by the employer, who has been trained in detecting and identifying use and impairment from cannabis and other intoxicating substances.

Finally, some good news for employers in New Jersey, employers are not required to permit or accommodate the use, possession, display, sale, or growth of cannabis in the workplace or during working hours.  Employers can continue to prohibit employees from being intoxicated by or under the influence of cannabis at work or during work hours.  And, if complying with New Jersey law would place the employer in violation of a federal contract, the employer may follow federal law.

The employment provisions in the law govern the conduct of employers and employees in New Jersey.  Accordingly, employers with operations in New Jersey must be mindful of the new protections afforded to employees who may choose to use marijuana.  Policies should make clear that  bringing marijuana onto company property is prohibited, using marijuana on company property and during work hours is prohibited and that employees may not come to work/may not work while intoxicated.  Employees subject to federal regulation or drug testing required by federal contract, should be reminded that federal law governs their conduct, and zero tolerance policies will continue to be enforced.  Finally, New Jersey employers should begin to identify the employees who will obtain WIRE certification.  In the meantime, drug testing for cannabis metabolites should be conducted only when there is reasonable suspicion of impairment or intoxication.

For Pennsylvania employers who employ residents of New Jersey, do not fret.  There is nothing in the law to suggest that protections apply to New Jersey residents who work in Pennsylvania.  While the employee may have the right to use recreational cannabis east of the Delaware River, recreational cannabis is not legal in Pennsylvania (yet).  Accordingly, Pennsylvania and federal law govern their employment in Pennsylvania.  Employers in Pennsylvania should continue to be mindful of the rights of medicinal marijuana users, but can continue to enforce zero tolerance and drug free workplace policies for all other employees.

Should you have additional concerns about changes to the law regarding marijuana use, wish to review or discuss training for your managers and Human Resources professionals, your drug testing and drug free workplace policies or have specific questions, please reach out to Denise Elliott, Ursula Siverling or another member of the Labor and Employment Group.

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.