In Revenue Procedure 2019-19 effective April 19, 2019, the IRS expanded a plan sponsor’s ability to Self-Correct certain retirement plan failures. This expansion makes it easier for plan sponsors to fix retirement plan mistakes without paying the fee assessed for corrections and, more importantly, without contacting the IRS. The changes expand the Self-Correction Program in three categories: plan loans, operational errors, and document failures.

Plan sponsors may now self-correct certain failures with respect to plan loans, including:

  • Providing participants new options to cure defaults on loan payments;
  • Correcting failures occurring when the plan allowed participants to have multiple loans even though it was not permitted under the plan;
  • Correcting a failure occurring when the plan provided a loan to a participant when the plan does not permit loans; and
  • Correcting failures occurring when the plan failed to obtain a required spousal consent.

Plan sponsors may also self-correct certain plan operational errors, such as administering a plan differently than the plan documents provide and failing to timely adopt a discretionary amendment, if certain criteria are met.

The new expanded Self-Correction Program also allows the correction of plan document failures such as a failure to timely amend the plan document or fixing a plan which is simply missing required language. Self-Correction of plan document failures must occur before the end of the second plan year of the failure.

Now is the perfect time to contact any member of our Employee Benefits Group to have your retirement plan document and procedures reviewed to find and fix potential problems.

Last legislative session, the Pennsylvania House of Representatives introduced H.B. 2664, which sought to add a new subsection to the Workers’ Compensation Act addressing post-traumatic stress disorders in certain first responders.  That Bill never made it out of committee, but that’s not the end of the story.

Last month, H.B. 432 was introduced.  Like it’s unsuccessful predecessor, this Bill seeks to add a new provision to the Workers’ Compensation Act adding post-traumatic stress disorders to the list of occupational diseases that the Act enumerates for certain first responders.

This Bill reflects a trend among other states, to extend workers’ compensation benefits to police officers, fire fighters and emergency medical service providers, who experience post-traumatic stress injuries due to traumatic events arising in the course and scope of their employment, or due to the cumulative effect of psychological stress in the course and scope of their job duties.

In particular, H.B. 2664 would allow a presumption of compensability in two situations:

  1. Where a police officer, fire fighter or emergency medical services provider experiences post-traumatic stress disorder, following exposure to a traumatic event or incident while working; or
  2. Where a police officer, fire fighter or emergency medical services provider, with 4 or more years of service, develops a post-traumatic stress disorder related to the cumulative effect of psychological stress at work.

Significantly, H.B. 2664 would amend Section 301(g) of the Act to allow workers’ compensation coverage of police officers, firefighters and emergency service providers in purely “mental-mental” cases, so long as there is a “substantial evidence” establishing a causal connection between a post-traumatic stress diagnosis, and a work exposure.  This is essentially a legislative elimination of the “abnormal working condition” standard, which had required proof of an event or incident highly unusual or abnormal, considering the type of work performed by the employee.

For example, under existing law, a police officer exposed to discovery of a rotting corpse might be ineligible for workers’ compensation, since this may not be an abnormal event for a busy city patrol officer (although it could be sufficient to establish a Heart & Lung Act claim for temporary benefits).  Should H.B. 2665 be enacted, the same officer would likely have a strong case for coverage of a related PTSD diagnosis.

This proposed legislation will be of most interest to municipal and public sector clients but could potentially impact providers of emergency medical services (i.e. hospitals or physician practice groups), ambulance crews and possibly even private sector employers who provide medical services through trained safety response teams.

We will continue to monitor this proposed legislation and will keep you informed.

On March 7, the Department of Labor released its Notice of Proposed Rulemaking seeking public comment on proposed changes to the minimum salary requirements in the Fair Labor Standards Act’s “white-collar” overtime exemption regulations.  If that sounds familiar, the DOL went through this same process back in 2015, only to have that new rule blocked by a federal court in 2016, days before it was set to take effect.

Key provisions in the DOL’s 2019 proposed rule (and how they compare to the 2016 final rule) include the following:

  • Raise the minimum salary requirement from $455 per week ($23,660 annually) to $679 per week ($35,308 annually). While this increase is significant, it is far less than that contained in the 2016 final rule, which would have more than doubled the minimum salary requirement to $913 per week ($47,476 annually).
  • Raise the total annual compensation requirement for the FLSA’s highly compensated employee exemption from $100,000 to $147,414. Interestingly, this increase is actually greater than the 2016 final rule, which would have increased this annual compensation requirement only to $134,004.
  • Review the minimum salary thresholds every four years, with any changes taking effect only after an opportunity for public comment. The 2016 final rule provided for automatic updates (i.e., increases) every three years, so the elimination of the automatic update language is another win for employers.
  • Allow employer to use non-discretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10% of the minimum salary requirement. This language is similar to language that appeared in the 2016 final rule.
  • Like the 2016 final rule, the 2019 proposed rule contains no changes to the white-collar exemptions’ duties tests or any other overtime exemptions.

The DOL estimates that the changes in the 2019 proposed rule would make more than a million currently exempt workers now eligible for overtime compensation.  By comparison, the DOL previously estimated that its 2016 final rule would make 4.2 million exempt workers eligible for overtime pay.  The DOL clearly is attempting to make more modest changes to the existing requirements for the white-collar exemptions.

Employers and other members of the public will be able to submit comments to the DOL regarding the proposed regulations for a 60-day period after the proposals are formally published in the Federal Register.  The DOL currently anticipates that the final rule will be issued in time to take effect in January 2020.

Of course, we in Pennsylvania still are waiting for the Pennsylvania Department of Labor and Industry to issue final regulations that likely will increase the minimum salary requirements for the white-collar overtime exemptions under the Pennsylvania Minimum Wage Act.

We anticipate that the requirements established under the federal and state regulations that we except to see in 2019 will not be the same, complicating compliance efforts for Pennsylvania employers.  While we do not yet know what the minimum salary requirements will be for the white-collar exemptions under both the FLSA and PMWA come 2020, employers should begin considering the impact that the proposed changes would have on the status of their exempt workforce.

We expect more news in the world of overtime exemptions in 2019.  Stay tuned.

In a key decision for many franchisors and franchisees, and others who rely on independent contractors, the National Labor Relations Board recently reinstated its test for examining contractor status.  In 2014, the Obama-era NLRB, in a case involving Fed Ex delivery drivers, “refined” its test for examining contractor status. The refinement was really a fundamental shift in how the NLRB reviewed these questions, and not surprisingly led to many more findings of employer-employee status.

The “refinement” diminished the importance of the workers’ entrepreneurial opportunities, holding that this question was really a minor part of the overall analysis, thus diminishing its importance greatly.  This question, which often supports a finding of independent contractor status, became much less of a focus for the NLRB.

In SuperShuttle DFW, the Board announced that it was overruling the Obama-era “refinement” and returning to the standard that had been in place for many years.  The NLRB cited years of case law, which held that the entrepreneurial opportunity was actually a key question in the analysis.

The NLRB made clear that it will continue to apply the common law agency test to analyze whether a worker is an independent contractor or an employee.  That test requires examination of a number of factors, including:

  • The extent of control exercised over the worker;
  • Whether the worker is engaged in a distinct occupation or business;
  • The kind of occupation, and whether it is typically performed under supervision;
  • The skill required;
  • Who supplies the tools and equipment necessary to do the work;
  • The length of time the worker is engaged;
  • The method of payment;
  • The intention of the parties with respect to their relationship; and
  • Whether the principal is a business.

The courts and the NLRB have long made clear that all of these factors must be considered and no single factor is controlling.  In addition, the analysis is not quantitative, but is qualitative.  In other words, one cannot simply count up the factors favoring one classification and make a determination. In SuperShuttle, the NLRB confirmed that all of the factors are important and no single factor will end the analysis.

The NLRB then clarified that entrepreneurial opportunity was indeed a key question, and not a sub-factor.  Just like the question regarding the right of control, the opportunity for profit and loss is really an issue that is at the heart of several of the factors.  Many of the factors may or may not demonstrate that the worker has an opportunity to make more money.  The NLRB stated that moving forward, while analyzing each factor, it will continue to ask whether the workers at issue do or do not possess entrepreneurial opportunity.

Where the common law factors demonstrate that the workers in question are afforded significant entrepreneurial opportunity, the NLRB will likely find independent contractor status.

We expect that this holding will return the balance back to the NLRB’s independent contractor analysis, and may help correct some of the more aggressive employer-employee decisions issued under the Obama-era standard.  If you have any questions regarding the status of any worker, please contact any member of our Labor and Employment Group.

At the end of 2018, the Superior Court of Delaware held that a terminated employee could proceed with his lawsuit, alleging that his employer terminated him for being a medical marijuana cardholder.  Chance v. Kraft Heinz Foods Co.  In allowing the suit to move forward, the Delaware Court found that the anti-discrimination language in the Delaware Medical Marijuana Act (“DMMA”) created an implied cause of action for employees to sue their employers.  Pennsylvania employers should pay attention to the Chance decision for several reasons: (1) the anti-discrimination language in the Delaware Medical Marijuana Act is similar to language contained in the Pennsylvania Medical Marijuana Act; (2) the Delaware decision continues the recent trend of employee-sided decisions by courts in Connecticut and Rhode Island; and (3) the Delaware case dealt with a post-accident drug test, thus further expanding protections for employees who use medical marijuana outside of work.

The facts of the case are straightforward, but important to note:

Chance was a seven-year employee at Kraft’s Dover, Delaware facility. In 2016, he obtained a Delaware medical marijuana card and used medical marijuana to treat a variety of medical conditions.  In late 2016, Kraft sent Chance for a post-accident drug test, after his “shuttle wagon” derailed. The Medical Review Officer contacted Chance and advised that he tested positive for medical marijuana. Chance explained to the MRO that he had a valid medical marijuana card and, indeed, produced a copy of the card.  Nonetheless, the test was verified positive and Chance was terminated in accordance with Kraft’s drug testing policy.

Notably, there were no allegations that Kraft believed Chance was under the influence or that the derailment was related to his use of medical marijuana.

Chance subsequently filed suit, alleging violations of, among other things, the anti-discrimination clause contained in the DMMA.  Kraft filed a motion to dismiss the suit, arguing that Federal Law, specifically the Controlled Substances Act, preempted the DMMA and that the DMMA did not create a private right of action.  The Delaware Court disagreed with Kraft and ruled for Chance.

On the preemption argument, the Delaware court noted that the Controlled Substances Act “does not make it illegal to employ someone who uses marijuana, nor does it purport to regulate employment matters.”  Rather, the CSA prohibits the unauthorized manufacture, dissemination, dispensing and possession of marijuana.  Accordingly, said the Court, the CSA was not in conflict with the DMMA, which provides that an “employer may not discriminate against a person in hiring, termination, or any term or condition of employment . . . if the discrimination is based upon either of the following: a) The person’s status as a cardholder; or b) A registered qualifying patient’s positive drug test for marijuana . . . unless the patient used, possessed, or was impaired by marijuana on the premises of the place of employment or during the hours of employment.”  In support of its finding that the two acts were not in conflict, the Delaware court cited to the 2017 decision of the Rhode Island Superior Court and the 2018 decision of the U.S. District Court for the District of Connecticut (Noffsinger v. SSC Niantic Operating Co, LLC).

Regarding the right of action argument, the Delaware Court made a common-sense ruling.  According to the court, the legislature would not have included anti-discrimination language in the DMMA if there was no mechanism for enforcing it:

The purpose of Section 4905A is to prohibit employment-related discrimination based upon either status as a medical marijuana cardholder or a qualifying patient’s positive drug test . . . In the DMMA, no agency or commission has been tasked with enforcement of the anti-discrimination provision . . . no remedy other than a private right of action is available to cardholders . . . The fact that an anti-discrimination provision was included in the DMMA demonstrates legislative intent to remedy the problem of discrimination based upon one’s cardholder status . . . Absent a finding of an implied right of action, Section 4905A would be devoid of any purpose within the broader context of the statute.

Again, in finding a private right of action, the Delaware Court found support in the prior decisions of the Rhode Island and Connecticut courts.

So . . . why should a Delaware decision matter to Pennsylvania employers?  Because the Pennsylvania Medical Marijuana Act (the “PA Act”) includes an anti-discrimination provision similar to the one in the DMMA.  By way of reminder, the PA Act states that “No employer may discharge, threaten, refuse to hire or otherwise discriminate or retaliate against any employee regarding an employee’s compensation, terms, conditions, location or privileges solely on the basis of such employee’s status as an individual who is certified to use medical marijuana.”  MMA section 2103(b)(1).  Because the two provisions are similar, it is reasonable to expect that a Pennsylvania Court, when confronted with the issue for the first time, will look to the decision of its neighboring state for guidance.

As Delaware joins the ranks of Connecticut, Rhode Island and Massachusetts in issuing employee friendly decisions and expanding protections for off-duty use of medical marijuana, Pennsylvania employers should take heed!

  • Conduct a careful review of your drug use and testing policies. A policy that mandates termination for a positive test, with no exception for legal off-duty medical marijuana use, could be discriminatory.  Relying on the traditional argument that a positive test for marijuana can result in termination because marijuana remains illegal under federal law, is not recommended.  Based on the decision in Kraft, such an argument likely will be rejected,
  • Proceed with caution when an employee, who is certified to use medical marijuana, tests positive, even if the test was administered post-accident. Rushing straight to termination based solely on a positive test may violate the PA Act.

Should you need assistance in revising your drug use and testing policies or wish to discuss the impact of medicinal marijuana legalization on your workplace, please contact Denise E. Elliott, Esq. or another member of our Labor and Employment Group.

Last year, the Supreme Court of the United States issued a significant decision upholding the use of individual arbitration agreements that include class action waivers. The Epic Systems’ Decision provided clarity to employers considering the use of arbitration agreements and class action waivers in the employment context. However, for employers with workers in the transportation industry, the Supreme Court has now taken a significant step back from the recent trend of opinions favoring arbitration agreements in the employment context.

In New Prime, Inc. v. Olivera, the Supreme Court held that the Federal Arbitration Act does not apply to workers (including independent contractors) engaged in transportation in interstate commerce. The Supreme Court has consistently noted that the Federal Arbitration Act (FAA) establishes “a liberal federal policy favoring arbitration agreements.” However, the FAA also contains a specific exclusion for transportation workers engaged in interstate commerce. The Supreme Court held in New Prime that this exclusion applies to all such transportation workers, regardless of whether they are classified as employees or independent contractors.

After New Prime, employers who enter into arbitration agreements with employees or independent contractors who transport goods in interstate commerce will not be able to rely upon the FAA when seeking to enforce those agreements.  The decision does not necessarily mean that all arbitration agreements with transportation workers are invalid, since Pennsylvania and most other states have laws relating to the enforcement of private arbitration agreements.  However, Epic Systems and other U.S. Supreme Court decisions which had strongly favored enforcement of arbitration agreements will not apply to arbitration agreements with transportation workers engaged in interstate commerce.  As such, employers should carefully evaluate any arbitration agreements with employees or independent contractors engaged in transportation in interstate commerce and the result may differ from state to state.

While the New Prime decision represents a step backwards with respect to enforcement of arbitration agreements with workers engaged in transportation in interstate commerce, most obstacles to enforcement have been cleared by the Supreme Court with respect to other workers.  As such, most employers have a green light to consider mandatory employment arbitration agreements and class action waivers, while employers in the transportation industry should now proceed with caution.

If you are considering using individual arbitration agreements with your employees and independent contractors, please contact any member of our Labor and Employment Practice Group.

 

In 2016 the Occupational Safety and Health Administration issued a Rule intended to improve the tracking of workplace injuries and illnesses, known as the Electronic Recordkeeping Rule.  The Rule would have required covered employers – those with 250 or more employees that are otherwise required to maintain OSHA injury and illness records, and those with 20-249 employees in designated “high-risk industries” (including manufacturing, construction, and many healthcare establishments) – to electronically submit Form 300A Summary of Work-Related Injuries and Illnesses data to OSHA on an annual basis.  The Rule also imposed an additional requirement on larger employers (those with 250 or more employees).  The Rule would have required those larger employers to electronically submit to OSHA much more detailed information from their OSHA Form 300 Logs and OSHA Form 301 Illness and Injury Incident Reports.

July 1, 2018 was the initial deadline for electronic submissions required by the new Rule.  However, OSHA suspended the implementation of the proposed Rule with respect to Form 300 and Form 301 data.  July 1, 2018 remained the date by which covered employers were required to electronically submit Form 300A summary data.

In welcomed news for larger employers, and apparently due to its new-found desire to protect worker privacy, OSHA has rescinded that part of the 2016 Rule requiring employers with 250 or more employees to electronically submit to OSHA the more detailed Form 300 Log and OSHA Form 301 data.  The OSHA note regarding the Rule, dated January 24, 2019, is available here.  As a result, electronic submission of OSHA Form 300 and OSHA Form 301 data is no longer required.

It is important to note that the remaining electronic recordkeeping requirements imposed by the 2016 Rule, as stated above, continue in effect.  Accordingly, all covered employers (250 or more employees and those with over 20 employees in designated high-risk industries) must electronically submit to OSHA Form 300A summary information, annually, by March 2 of the following calendar year.

If you have any questions regarding your OSHA reporting requirements, please contact any member of our Labor and Employment Group.

2019 is the year of “tidying up” thanks to the popular Netflix show.   Start the year off by reevaluating your employee benefit plans to determine whether they continue to meet the changing needs of your workforce while complying with changing regulatory requirements.   Here is our top-ten list of changes to consider in 2019 (in no particular order):

  • Update your qualified plan’s 402(f) Notice to include recent changes extending the rollover deadline for loan offsets.
  • Update your hardship withdrawal procedures to comply with recent IRS proposed regulations.
  • Update your plan document to allow forfeitures to fund QNECs, QMACs, or safe harbor matching, thereby, saving your company money.
  • Update your investment policy if you invest in socially responsible investments to capture recent DOL guidance so that the company’s effort to be socially responsible does not result in a breach of fiduciary duty.
  • As a recruiting tool, consider updating your incentive plans to include a deferred compensation option that pays out on significant life events before retirement.
  • Update your deferred compensation arrangements to ensure that there is no question that the agreements comply with Section 409A.
  • Update your disability benefits claims procedure to ensure that it complies with DOL regulations that took effect in 2018.
  • Review your Wellness Programs to ensure compliance with HIPAA, ADA and other laws (particularly with respect to financial incentives).
  • Update your missing participant procedures.
  • Update your fiduciary committee charters and best practices to ensure that they are still really “best practices”.

We look forward to working with you in 2019 and wish you a happy new year.  If you need assistance with any employee benefits matter, including any of the above changes, please contact any member of our Employee Benefits and Executive Compensation group.

McNees Wallace & Nurick LLC is pleased to announce the expansion of its Employee Benefits and Executive Compensation Practice Group with the recent addition of attorney Renee Lieux and specialist Kimberly Weibley.

Renee has focused her practice on executive compensation and employee benefits for nearly 20 years.  She assists both private and publicly traded companies in the formation of executive compensation programs and the negotiation of executive employment agreements.  She designs and assists in the implementation of non-qualified deferred compensation plans, equity compensation plans, and cafeteria plans.   Clients also seek her assistance with the administration, compliance, and termination of defined contribution plans, defined benefit plans, profit sharing plans, 401(k) plans, and employee stock purchase plans.  In addition, Renee advises clients on employee benefits issues arising out of mergers and acquisitions.  Renee has experience counseling clients on ERISA and Section 409A and advising compensation committees of publicly traded companies.

As an Employee Benefits Specialist, Kim assists clients with the design and administration of tax-qualified retirement plans, welfare benefit plans and non-qualified retirement plans. She aids clients with legal compliance issues through the preparation of plan documents, IRS determination letter applications and applications relating to IRS and DOL compliance programs.  Kim has experience in qualified plan design and preparation of plan amendments, SPDs and SMMs.  She also assists clients in the design and drafting of administrative procedures and forms, especially those relating to 401(k) plans, COBRA, QDROs and flexible benefit programs.  Kim has over 15 years of experience working as a benefits professional in private industry and is particularly adept at identifying practical solutions to complex problems.

The McNees Employee Benefits and Executive Compensation Practice Group offers a range of services and leading-edge techniques, with a personalized approach.  Our knowledgeable interdisciplinary group — which includes professionals skilled in tax, labor, general business and litigation — ensures creative, thorough, vigorous and affordable representation.

Have you ever felt that reading the decisions of the National Labor Relations Board is a lot like watching a tennis match?  The decisions on key workplace issues go back and forth, back and forth, and you are just stuck watching.  The good news, at least, is that lately, employers have been holding serve.  Recently, the National Labor Relations Board served up another decision that provides some clarity and helpful guidance for employers.

In Alstate Maintenance LLC, the Board clarified the definition of “concerted” under the National Labor Relations Act, and reiterated that individual employee complaints or gripes are not “concerted” activity under the Act.  Before we look at Alstate, let’s take a step back and examine what Section 7 of the Act protects.

Section 7 may be the Act’s most important provision, and it is certainly the area that gets the most attention and litigation.  Section 7 provides employees with the right “to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.In order to be protected, employee activity must be “concerted” and engaged in for the purpose of “mutual aid or protection.”  These terms have been examined extensively by the Board and the courts.

The definition of “concerted” for example, has been argued about countless times.  For nearly three decades, the Board used a consistent standard to review whether an employee’s activities were “concerted.”   The standard is known as the Myers Industries test, and it is named after a series of cases that date back to the 1980s.  Essentially, under Myers Industries, concerted activity is defined as (1) group action or action on behalf of other employees; (2) activity seeking to initiate or prepare for group activity; or (3) bringing a group complaint to the attention of management.  Individual gripes or complaints were not protected.

The Board modified the last part of this test in 2011 when it issued its decision in WorldMark by Wyndham, which held that lodging a complaint in a group setting and using the term “we” qualified as concerted activity.  This decision essentially held that an individual complaint in a group setting qualified as “concerted” activity.

Alstate reversed WorldMark by Wyndham and reinstated the Myers Industries test set forth above.  In Alstate, the Board said that a complaint in a group setting, alone, is not enough to satisfy that test.  The Board clarified that for an employee’s statement to qualify as a group complaint, the statement must be a complaint regarding a workplace issue and the circumstances must make it clear that the employee was seeking to initiate or induce group action. In other words, an individual gripe does not qualify as concerted activity, even if it takes place in front of other employees.

We are hopeful that the Board will continue to issue employer-friendly decisions and guidance, and we will be sure to continue to provide you with updates on these decisions and other key developments.  Please subscribe to our blog by entering your email address on the right side of your screen to receive a notification when we post new information to our blog.