Coronavirus (COVID-19) has dramatically changed our daily lives, at least for now and the foreseeable future. What tomorrow (or the next hour) will bring is a bit uncertain.  In an effort to assist employers faced with unique challenges in the context of this pandemic, the Occupational Safety and Health Administration (OSHA) has issued a new Alert and Guidance addressing best practices for minimizing and managing workplace concerns and risks related to COVID-19.

OSHA’s Guidance stresses the importance of planning to “reduce the impact of COVID-19 outbreak conditions on businesses, workers, customers, and the public.”  Employers are encouraged to use the Guidance to “help identify risk levels in workplace settings and to determine any appropriate control measures to implement.”

In contrast to the abundance of misinformation and confusion on this topic, OSHA’s COVID-19 Guidance provides clear and meaningful information regarding symptoms, how the virus spreads, the impact of a workplace outbreak, and most important steps employers can take to reduce risk of employee exposure.  In addition to recommendations applicable to all workers, the Guidance usefully provides recommended control measures specific to low exposure risk jobs, medium exposure risk jobs and high exposure risk jobs.

OSHA’s COVID-19  Guidance is a helpful resource that should be a part of every employer’s planning efforts. If you have any questions regarding your compliance with the Act, please do not hesitate to contact McNees’ Labor and Employment Group.

Federal government contractors will need to be aware of the Fair Chance Act, a recently enacted statute that is scheduled to go into effect on December 20, 2021.  The Act is a “ban-the-box” law that prohibits covered employers from inquiring about an applicant’s criminal history in the early stages of the hiring process.  The Act prohibits the federal government and federal contractors from requesting criminal history information until job applicant is made a conditional offer of employment.

The purpose of the law is to give individuals with prior criminal convictions a better opportunity at obtaining employment by deferring inquiry into their criminal history.

The Act implements a progressive disciplinary policy for violators of its prohibitions.  A federal contractor’s first violation will result in a warning.  Any subsequent violations could result in the suspension of payments owed under the relevant government contract.  Likewise, an individual making a hiring decision for a federal agency who violates the Act will receive a warning that is filed in the employee’s official personnel record file.  Subsequent violations could lead to suspensions and civil penalties.

There are exceptions to the Act.  For example, if the position is related to law enforcement and national security duties, requires access to classified information, or requires a criminal history investigation pursuant to law, then a pre-offer criminal history inquiry is permitted.

Ban-the-box laws affect many parts of the hiring and employment process.  Federal contractors and federal agencies should review and revise their hiring practices, application forms, policies, and procedures to ensure compliance.  If you have any questions regarding your compliance with the Act, please do not hesitate to contact McNees’ Labor and Employment Group.

According to the Centers for Disease Control and Prevention (CDC), the Coronavirus, or COVID-19 as it has been named, is a respiratory illness that can spread from person to person.  COVID-19 is a novel coronavirus that was first identified in late 2019 during an investigation into an outbreak in Wuhan, China.  Cases of coronavirus have passed 100,000 globally, with a significant number of reported and confirmed cases in the US. The most common symptoms of the virus are fever, tiredness, dry cough, aches and pains, nasal congestion, runny nose, sore throat or diarrhea.

All employers need to consider how best to limit the impact of COVID-19 on their business and protect their employees.  The CDC has published Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 (COVID-19), which include the following guidance.

  • Emphasize staying home when sick. Require sick employees to stay home until free of fever, signs of a fever, and any other symptoms for at least 24 hours without use of fever-reducing or other symptom suppressing medicines.
  • Separate sick employees. The CDC recommends that employees who appear to have flu-like symptoms upon arrival to work or become sick during the day should be separated from other employees and sent home immediately.
  • Emphasize Measures to Prevent Spread. Encourage good respiratory etiquette (covering your mouth and nose with your elbow when you cough or sneeze) and hand hygiene by all employees – place posters on proper hygiene around the workplace, provide tissues and no-touch disposal receptacles; instruct employees on effective hand sanitation; and ensure adequate supplies of alcohol-based hand sanitizer.
  • Perform routine environmental cleaning.
  • Consider limiting all non-essential business travel and using Skype or web-based meetings as an alternative.
  • Monitor and plan for increased employee absence due to illness of the employee or their family members, or potential exposure or school closings.
  • Review available occupational health resources on a regular basis. Closely monitor daily updates from public health officials as up-to-date information is key due to the rapidly evolving situation.  The main sources of information can be found at eeoc.gov, www.cdc.gov, and www.osha.gov.

The continued spread of this virus internationally and in the US has created a number of practical and legal issues for employers to consider, including the following:

What can employers do to limit the likelihood of exposure to the virus?

Employers may choose to limit work-related travel and restrict visitors to the workplace, and they may require that employees who exhibit flu-like symptoms stay at home or go home if they have reported to work.  Additionally, if an employee has been out of the office due to an illness or quarantine, an employer can require that the employee provide a doctor’s note certifying their fitness to return to work, or other verification that he or she has been symptom free for at least 24 hours.

In order to provide greater distancing and limit potential exposure, employers may want to consider flexible work policies, such as work from home, flexible work hours, or staggered shifts.  If telecommuting will be permitted, businesses should ensure that information technology systems are sufficient to permit increased usage of remote access.

Employers can require employees who have traveled to key affected areas, for personal or business reasons, to stay home for a certain period of time (up to 14 days).

How does the Americans with Disabilities Act (ADA) affect an employer’s Coronavirus preparation and response?

The ADA prohibits discrimination in the workplace against employees and applicants with disabilities and requires employers to provide reasonable accommodations when necessary.  The ADA also limits the type of medically related inquiries that an employer can ask of an applicant or employee, and imposes strict confidentiality requirements relating to any medical information that is obtained.  A medical inquiry or examination during employment is permissible only if it is job-related and consistent with business necessity.  If an employer has a reasonable belief based on objective evidence that an employee will pose a direct threat to other employees due to a medical condition, then medical inquiries concerning that condition will be job-related and consistent with business necessity.  According to the Equal Employment Opportunity Commission (EEOC), taking an employee’s temperature to determine if he or she has a fever is an example of a medical inquiry.

The EEOC has issued Guidance on Pandemic Preparedness in the workplace that offers some helpful guidelines for employers, which can be found at https://www.eeoc.gov/facts/pandemic_flu.html. According to the EEOC Guidance, whether the Coronavirus will rise to the level of a “direct threat” under the ADA will depend on it if reaches pandemic levels versus current epidemic levels and the severity of the illness/risk.  Employers who are considering temperature scans or other medical inquiries should consult with labor and employment counsel to ensure that the medical inquiry is permitted under the ADA.

It is also important to emphasize that employers are required under the ADA to keep all medical information received from or about an employee confidential.

How should employers pay employees who are ill or quarantined as a result of the Coronavirus?

Employers may require an employee who needs time off work due to symptoms or potential exposure to the virus to use available paid time off, such as sick leave or vacation.  If paid time off benefits are exhausted, the law does not generally require employees to be paid when not working.  However, before making any salary deduction from an employee who is exempt from the overtime requirements of the Fair Labor Standards Act, employers should ensure that the exempt employee performed no work in the workweek, or that the deduction is otherwise permissible.

The CDC also recommends that employers consider whether current leave and attendance policies are flexible enough to allow employees who have symptoms or have potentially been exposed to the virus, but cannot work from home, to take time off from work.

What other steps should employers take to prepare?

Employers should be ready to implement strategies to protect their employees from COVID-19 while ensuring business continuity.  This is accomplished by developing and implementing a Business Continuity and Disaster Recovery Plan to maintain operations without interruption of vital business functions.  Key issues for employers to consider include:

  • How many absences can the organization handle before business operations are interrupted?
  • How will the business continue to operate during an interruption?
  • What changes can be made to keep the business operating effectively?

Employers should consider establishing a critical incident response team to manage this plan once implemented.  Finally, frequent communication with employees will be necessary to assure them that the business has a plan to keep them safe and keep the business running

If you require support in creating your preparedness plan, or in addressing any specific circumstances that may arise, please do not hesitate to contact any member of the McNees Labor and Employment Group.

Join us on Thursday, March 12, 2020 from 12:00 – 1:00 p.m. for a webinar on Coronavirus Preparedness in the Workplace. Register here.

If your business operates in Maryland, you need to be aware of SB 839, a law that took effect February 29, 2020.  SB 839 prohibits employers with 15 or more full-time employees from asking job applicants about their criminal history prior to the first in-person interview.  Specifically, the law precludes employers from asking applicants whether they have a criminal record or have been accused of a crime.   As a result, employers may no longer ask applicants about their criminal history on a job application or during a phone interview.

SB 839 defines employment as “any work for pay and any form of vocational or educational training, with or without pay.”  This includes “contractual, temporary, seasonal, or contingent work” and work assigned through a temporary or other employment agency.

There are exceptions to SB 839.  For example, an employer may ask about an employee’s criminal history if the employer is required to or is authorized by another applicable federal or state law.  Additionally, prohibition on seeking criminal history information early in the application stage does not apply to employers that provide programs, services, or direct care to minors or vulnerable adults.

The Commissioner of Labor and Industry is authorized to enforce SB 839.  If an employer violates SB 839, the Commissioner will issue an order compelling compliance.  The Commissioner may assess a civil penalty of up to $300.00 for each subsequent violation.

It is important to note that the Act does not preempt local governments from enacting more restrictive ban-the-box ordinances.  For example, Baltimore City maintains an ordinance that prohibits an employer from asking about an applicant’s criminal history until after the employer makes a conditional offer of employment.  This ordinance is more restrictive than the new statewide law.

There are other notable differences between Maryland’s ban-the-box law and the local ordinances, such as the number of employees required to trigger SB 839.  If you operate in multiple counties in Maryland, make sure you are aware of these requirements.

All employers operating in Maryland should take the opportunity to audit, and if necessary, revise their hiring practices, application forms, and policies to ensure compliance with Maryland’s statewide and local ban-the-box laws. If you have any questions regarding your company’s compliance with Maryland’s ban-the-box laws, please do not hesitate to contact McNees Wallace & Nurick’s Labor and Employment Group.

Lately, products containing CBD (from beer to skin cream to oils that can be diffused and vaped) seem to be all the rage.  Why are CBD products suddenly turning up everywhere (your local Sheetz convenience store for example)?  Blame it on the Farm Bill!  The Agricultural Improvement Act of 2018 (otherwise known as the U.S. Farm Bill), removed hemp from the definition of marijuana under the Controlled Substances Act.  As a result, hemp is no longer a controlled substance and, because CBD (which stands for cannabidiol) can be derived from hemp, CBD is arguably legal.

So what is the problem?  Why are people who are using CBD products still testing positive for “marijuana” and why should employers be concerned?

CBD is a chemical compound found in the Cannabis family of plants.  Notably, Cannabis has two main species – the hemp plant and the marijuana plant.  CBD is not believed to have psychoactive properties.  In other words, cannabidiol will not get you high.  The other primary chemical compound found in Cannabis plants is THC (tetrahydrocannabinol).

THC does have psychoactive properties and is known as the compound that causes the “high.” THC is also the compound that is evaluated for drug testing purposes.  One of the main differences between hemp and marijuana is the concentration of CBD vs. THC that each contains.  Hemp, by definition (as noted in the Farm Bill), contains 0.3% or less of THC.  Marijuana, can have THC concentrations of up to 20%.  CBD can be and is derived from both plant species, but for purposes of technical legality, only hemp-derived CBD is legal under the Farm Bill.  To obtain marijuana-derived CBD, in states where marijuana is not legal, an individual would require certification to use medicinal marijuana.

With that mini-science lesson out of the way, what does all of this mean for employers?

Certain CBD products – oils for example – are marketed and sold as dietary supplements that can combat a variety of ailments, for example anxiety and insomnia.  The FDA does not regulate the safety and purity of dietary supplements.  Accordingly, there is no governmental organization confirming that the CBD product contains (or rather only contains) the ingredients contained on the label.  Relative to employer drug testing concerns, there is no governmental organization checking that CBD supplements are actually derived from hemp and do not contain more than 0.3% THC.  Thus, there is a risk that the CBD supplement is not what it says it is and an employee who is “only using CBD,” may nonetheless test positive for marijuana on a drug test.  Indeed, several lawsuits have been filed against CBD manufacturers arguing that products marketed as containing only CBD and being THC free, have resulted in employees failing employer required drug tests.

Accordingly, employees using, or claiming to use, “only CBD” has created a haze of uncertainty for employers and how such claims, which typically follow a positive drug screen, should be handled.

For purposes of employees regulated by the U.S. Department of Transportation (i.e. school bus drivers and truck drivers), the answer is clear.  Last month, the DOT issued a “CBD Notice” stating plainly

The Department of Transportation’s Drug and Alcohol Testing Regulation, Part 40, does not authorize the use of Schedule I drugs, including marijuana, for any reason.  Furthermore, CBD use is not a legitimate medical explanation for a laboratory-confirmed marijuana positive result. Therefore, Medical Review Officers will verify a drug test confirmed at the appropriate cutoffs as positive, even if an employee claims they only used a CBD product.

In issuing this Notice, the DOT referenced cautionary statements issued by the FDA:

The FDA has cautioned the public that: “Consumers should beware purchasing and using any [CBD] products.”  The FDA has stated: “It is currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement.” Also, the FDA has issued several warning letters to companies because their products contained more CBD than indicated on the product label.

So, for DOT regulated drug testing, the answer is clear – CBD is not a get out of jail free card.  Regardless of the alleged reason for the positive test, a positive test for marijuana will be a positive test for marijuana.  Employees in DOT regulated positions should act accordingly.

But what about non-DOT regulated employees?  The answer is not as clear, but there are a few common sense principles that employers can use to address and hopefully diffuse this issue.  First, as we’ve discussed in prior blog posts, employees who are certified under state law to use medical marijuana have certain protections (protection against discrimination, for example).  As a result, many employers have modified their drug testing policies to include exceptions that apply to employees who are certified to use medical marijuana.  Because an employee who is using an over the counter CBD supplement likely is not certified to use medical marijuana, that employee would not be protected by the state medical marijuana act.  Accordingly, employers may want to include a notation in their drug testing policies that the term “medical marijuana” refers only to marijuana that is obtained in accordance with a state medical marijuana program.

Second, employers should remember that employees don’t know what they don’t know.  If an employee does not realize that using CBD oil that he obtained online could jeopardize his employment, he is going to be quite upset when he tests positive for marijuana and is fired.  Accordingly, employees should be advised that there is a risk to using CBD products, that drug testing facilities will not consider alleged CBD use as a legitimate medical reason for a positive drug test and that, if an employee tests positive and does not have a medical marijuana card, the company may treat the positive test as a violation of the drug testing policy.

Finally, employees who question an employer for implementing the above-referenced practices could be directed to the FDA issued guidance on CBD products.

We’ve said it before, and we’ll say it again, if you have not revised your drug testing policy to address the issues created by medical marijuana and CBD, there is no time like the present.  Should you need assistance with your policy revision or with crafting appropriate notices to your employees, do not hesitate to contact any member of the McNees Labor and Employment Group.

On February 26, 2020, the National Labor Relations Board issued a final rule governing joint-employer status under the National Labor Relations Act.  The final rule restores the test that the Board had applied for several decades prior to the 2015 Obama-era decision in Browning-Ferris.  The final rule also provides more clear guidance on the issue, which should be a welcome change for those seeking avoid a joint employer finding in this often shifting and murky area of the law.

The 2015 Browning-Ferris decision issued by the Obama Board vastly expanded the situations in which a franchisor or a source employer could be deemed a joint employer with its franchisee or with a user of a contingent workforce. In Browning-Ferris, the Board held that a joint-employer relationship may be found if two or more entities “are both employers within the meaning of common law, and if they share or codetermine those matters governing the essential terms and conditions of employment,” such as wages, hours, work assignments, and control over the number of workers and scheduling.  The Board further found that a joint employer is not required to exercise its authority to control the terms and conditions of employment, and recognized that control may be “reserved, direct and indirect.”

In December of 2017, the Trump Board decided Hy-Brand Industrial Contractors, and announced that it would return to the prior standard that required proof of a joint employer’s actual exercise of control over essential employment terms, rather than merely having reserved the right to exercise control.

However, in late February 2018, the Board issued an order vacating Hy-Brand based on a determination by the Board’s Ethics Official that one of the three Members who participated in the decision should have recused himself. With that disqualification no Board quorum existed and the decision as set aside.

Then, in September of 2018, the Board issued a notice of proposed rulemaking regarding the standard for determining joint employer status. According to its Annual Performance and Accountability Report, the Board received nearly 29,000 comments on the proposed rules.  After processing those comments, on February 26, 2020, the Board issued its final regulations.  A fact sheet summarizing the final rule is available here.

As the fact sheet indicates, “a business is a joint employer of another employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment.”   Sounds similar, right?  The Board went on to clarify the list of essential terms and conditions of employment as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.  Critically, to be a joint employer, a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment.  No longer is indirect and contractually reserved but never exercised control alone enough to find joint-employer status.  The final rule also defines many of the key terms used in the joint employer test.

The final rule certainly offers helpful guidance, and should result in fewer joint employer findings.  The joint employer question is critical for a number of reasons, including exposure to liability under the Act, issues related to unfair labor practice charges, collective bargaining and more.  In recent history, the Board has addressed the joint employer standard in a number of ways, but hopefully, the final regulations, which offer substantial clarity, will really be final, at least for a while.

Two years ago, the first medical marijuana dispensary opened in Pennsylvania.  Since that time, well over a hundred thousand Pennsylvania residents have become certified to use medical marijuana, additional conditions were added to the listed of qualifying serious health conditions and employers started to field questions from employees who wanted to use (or already were using) medical marijuana.  So, two years later, what do employer’s need to know?

  1. There’s a new protected classification in PA – an individual who is certified to use medical marijuana

As we’ve discussed previously, the PA Medical Marijuana Act provides that “no employer may discharge, threaten, refuse to hire or otherwise discriminate or retaliate against an 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.”  Act 16, §2103(b)(1).  The impact of this anti-discrimination provision, however, was unknown until late in 2019.  In late November, as an early Christmas gift to employees, Judge Nealon of the Court of Common Pleas of Lackawanna County, held that a medical marijuana patient could proceed with her lawsuit alleging discriminatory discharge by her former employer.

According to the complaint filed in Palmiter v. Commonwealth Health Systems, the plaintiff was denied continued employment when she could not pass a drug screen due to her off-duty use of medical marijuana.  Plaintiff filed suit in the Court of Common Pleas and alleged, among other things, that her discharge violated the anti-discrimination provision contained in Act 16.  The employer sought dismissal of the lawsuit, arguing that Act 16 did not create a private right of action for discriminatory discharge.  Judge Nealon, following the trend of decisions in Delaware, Rhode Island and Connecticut, among others, disagreed with the defendant.  According to Judge Nealon, neither the Department of Health nor any other state agency was vested with the authority to enforce the anti-discrimination provision.  Accordingly, if an employee could not pursue a private right of action in state court, section 2103(b)(1) would be rendered meaningless.

Note, in allowing the suit to proceed, Judge Nealon has not ruled on the merits of plaintiff’s discrimination claim.  Further, we do not yet know what types or levels of damages may be recoverable by a plaintiff who can prevail on such a discrimination claim.  Nonetheless, the impact of Judge Nealon’s decision should not be understated . . . employees who are certified to use medical marijuana are a protected class in Pennsylvania.  Any such employee who believes he/she was discharged, threatened, not hired, etc., because of his/her certification to use medical marijuana will be able to file a lawsuit, straight into state court, alleging discrimination.  As a result, employers would be wise to review and consider how employees who use medical marijuana outside of work will be treated.

  1. The trend of court decisions is patient/employee friendly.

In ruling for the plaintiff in the Palmiter case, Judge Nealon followed the trend of judges in Delaware, Rhode Island, New Jersey, Connecticut, Massachusetts and Arizona, all of whom have ruled in favor of patients/employees certified under state law to use medical marijuana.  In Pennsylvania, in addition to Judge Nealon (who is a trial court judge), the appellate courts also appear poised and ready to protect the rights of medical marijuana users in the state.  In October, the ACLU filed an action on behalf of a class of Pennsylvania residents impacted by the Medical Marijuana Policy of the Lebanon County Court of Common Pleas.  The Court’s Policy prohibits the active use of medical marijuana by anyone under court supervision (i.e. those on probation or parole).  Though the suit was filed in the Commonwealth Court, on October 30th the Pennsylvania Supreme Court exercised its King’s Bench jurisdiction and voted to hear the case itself.  Notably, in doing so, the court temporarily enjoined enforcement of the Policy, a move seen as friendly to those seeking to legally use medical marijuana under Act 16.  The class of medical marijuana users opposing the Policy filed their brief with the Supreme Court last week and argued, among other things, that the Lebanon County Court’s Policy forces them to choose between seizures and jail and contradicts the critical purpose of Act 16 – to protect the rights of those who are certified to use medical marijuana from being arrested or prosecuted for using it.

While this case is not an employment related matter, PA employers should pay attention.  Should the Supreme Court permanently enjoin enforcement of the Policy, such a ruling will continue the trend of patient friendly decisions and could be predictive of how a court might rule in a dispute between an employer and an employee/medical marijuana user.

  1. The list of qualifying serious health conditions expanded, and, chances are, you have employees who are using, or soon will be using, medical marijuana.

In 2019, two new conditions were added to the list of serious health conditions for which PA residents can obtain medical marijuana.  The first – Tourette’s Syndrome – wasn’t much of a game changer.  The second, however – Anxiety – caused many employers to sit up and take notice.  According to the Anxiety and Depression Association of America, anxiety disorders are the most common mental illness in the U.S., affecting 18.1% of the adult population.  Accordingly, if you do not yet have an employee who has disclosed his/her use of medical marijuana, with the addition of anxiety to the list of qualifying conditions, it is likely only a matter of time.  Thus, for employers there is no time like the present to review your drug testing policy and to consider how your organization will handle medical marijuana use by employees.

A recent decision from Pennsylvania’s Commonwealth Court is likely to result in additional burdens on construction firms working with Pennsylvania school districts. In an already tight labor market, the court’s decision in United Union of Roofers, Waterproofers and Allied Workers, Local Union No. 37 v. North Allegheny School District et al could add to the difficulty of finding qualified workers to perform work on school projects.

The North Allegheny case was initiated by the United Union of Roofers, Waterproofers, and Allied Workers, which represents roofers and others, and operates a hiring hall by which it contracts out its members to roofing companies. In the summer of 2015, two public school districts in Western Pennsylvania—North Allegheny and Fox Chapel—solicited bids for roofing projects at various buildings throughout their respective districts.  The contracts furnished by the school districts required all construction workers to obtain criminal background checks in accordance with Section 111 of the School Code.

The School Code, at Section 111, indeed requires background checks for independent contractors and their employees, but only for those individuals that will have direct contact with children.  That provision seems to account for the fact that construction work at public schools is typically performed during the summer break (when no children are present), and also that construction or renovations often require many tasks where workers have no contact, nor any possibility of contact, with children.

North Allegheny and Fox Chapel’s construction contracts exceeded the background check requirements imposed by the School Code, and several workers were denied security clearances to work on the roofing projects.  The union filed suit to prevent the school districts from disqualifying its workers, arguing that because its members had no direct contact with children, they were exempt from the background checks because such checks are not required by the School Code.

The Commonwealth Court rejected the union’s argument.  The court acknowledged that the School Code exempts from background checks those workers having no direct contact with children; however, the court reasoned that nothing prohibits the school districts from requiring criminal background checks that exceed the mandates of the School Code.  In other words, the school districts may require background checks even for those workers having no direct contact with students.

The impact of this decision is likely to add to the difficulty contractors may already experience in adequately staffing projects. We will continue to monitor any further developments in this litigation, as well as any legislative fixes that may arise.

If you have any questions about how this decision might affect your business, feel free to contact any member of the McNees Labor and Employment or Construction and Procurement Law practice groups.

As a follow up to its Notice of Proposed Rulemaking issued in April 2019, the US Department of Labor (DOL) announced on January 12, 2020, the issuance of a Final Rule to revise and clarify the standard for joint employment status under the Fair Labor Standards Act (FLSA). The DOL explained that the Final Rule was necessary because the circuit courts were using a variety of tests to determine joint employer status which has resulted in inconsistent findings, confusion for employers and employees and increased litigation costs for employers.

The Final Rule adopts the four-factor balancing test from Bonnette v. California Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1983) for determining joint employer status in situations where another individual benefits from an employee’s work. The DOL is of the opinion that the Bonnette test follows the “any person acting directly or indirectly in the interest of an employer in relation to an employee” language included in the FLSA’s definition of “employer.”

Under the four-factor test, where an employee performs work for an employer and another individual benefits from that work, the other individual will be considered a joint employer when found to be directly or indirectly controlling the employee. Direct or indirect control is established when the potential joint employer applies one or more of the following “control” factors, the ability to:

  • Hire or fire the employee;
  • Supervise and control the employee’s work schedule or conditions of employment to a substantial degree;
  • Determine the employee’s rate and method of payment; and
  • Maintain the employee’s employment records.

The Final Rule establishes that no single factor will be determinative in the joint employer analysis and the weight given to any single factor will depend on the specific factual scenario. Additionally, an employee’s economic dependence on a potential joint employer alone will not determine the existence of joint employer status. The Final Rule also acknowledges that other factors may come into play when determining a joint employer relationship but only if they establish that the potential joint employer exercises significant control over the employee. The DOL specifically discussed several factual scenarios that will not be controlling in the joint employer analysis, including the following:

  • The potential joint employer’s practice of sharing resources and/or benefits such as handbooks or other policy forms, allowing the employer to operate a business on its premises, offering an association health plan or retirement plan to the employer or participating in such plan with the employer, jointly participating in an apprenticeship program with the employer, or any other similar business practice.
  • Operating as a franchisor, entering into a brand and supply agreement, or using a similar business model;
  • The potential joint employer’s requirement that the employer comply with all legal, health and safety obligations;
  • The potential joint employer’s agreement with the employer regarding quality control standards to ensure the consistent quality of the work product, brand, and/or business reputation.

Finally, to assist employers in understanding the new analysis, the Final Rule provides a number of illustrative examples which apply the new analysis to various factual scenarios. The Final Rule is expected to be effective on March 6, 2020. We recommend that employers use this time to review any relationships with individuals who are not directly employed by them but from whom they receive beneficial services to determine if a potential joint employer relationship exists.

If you have any questions regarding the Final Rule from the US DOL on Joint Employer status, please contact any member of the McNees Labor and Employment Group.

In the past few months, we have seen significant changes to the laws governing employee benefits, from the new hardship withdrawal regulations for 401(k) participants, to the SECURE Act, to the new individual coverage health reimbursement arrangement (“HRA”).  Here is what you need to know for 2020:

Starting December 20, 2019:

  • Qualified Plan loans may no longer be distributed through credit cards or similar arrangements.
  • Employers sponsoring defined contribution plans have an optional safe harbor method they can use to satisfy the prudence requirement in their selection of an insurer as an in-plan annuity provider if they engage in an objective, thorough, and analytical search for the insurer and determine that the insurer is financially capable and the relative cost is reasonable.

Starting January 1, 2020:

  • Employers may offer individual coverage HRAs to certain classes of employees to whom they do not offer health insurance.
  • The age for required minimum distributions from a retirement plan has increased from 70 ½ to 72. Participants who turned 70 ½ in 2019 will fall under old rules and will receive their initial RMD prior to April 1, 2020.
  • The age for allowable in-service distributions from a pension or 457(b) plan has decreased from age 62 to 59 ½.
  • Participants may withdraw up to $5,000, penalty free, within a 1-year period from their retirement plan for any qualified birth or adoption.
  • Certain retirement plans may make trustee-to-trustee transfers to another employer-sponsored retirement plan or IRA of a lifetime income investment or distribution.
  • If an employer offered a “safe harbor plan”, the employer was required to provide a safe harbor notice to its participants prior to the beginning of the plan year informing the participant of his or her rights and obligations under the plan and meeting other content requirements. The safe harbor notice requirement is now eliminated.
  • The default contribution rate under an automatic enrollment safe harbor plan is increased from 10% to 15% for years after the participant’s first deemed election year. The cap on the default rate for the first deemed election year is 10%.
  • Under a safe harbor plan, the plan either provided for a matching contribution or provided for a nonelective contribution of at least 3% of an employee’s compensation. Now, the plan may decide which method to use up until the 30th day before the close of the plan year.  Any amendments after that time but before the close of the following plan year are allowed if a nonelective contribution of at least 4% of compensation is made.
  • Changes in nondiscrimination rules applicable to closed pension plans will allow existing participants to continue to accrue benefits.
  • Retirement plans adopted after the close of a tax year but before the due date of the employer’s return may be considered adopted as of the previous year.
  • Plans must be in operational compliance with the following hardship withdrawal regulations:
    • Plans are no longer allowed to suspend deferrals when a participant requests a hardship withdrawal.
    • Hardship withdrawals may be made for losses incurred on account of a FEMA-declared disaster, provided the participant lives or works in the designated area.
    • Participants may take a hardship withdrawal for the qualifying medical, educational, and funeral expenses of primary beneficiary.
    • With respect to a hardship withdrawal request, the plan administrator may rely upon the participant’s written representation that he/she has insufficient cash or liquid assets to satisfy the financial need.

The cap on start-up tax credits for establishing a retirement plan will increase to up to $5,000 (depending on certain factors) from $500. Small employers who add automatic enrollment to their plans also may be eligible for an additional $500 tax credit per year for up to three years.

And if you are planning for the future, starting January 1, 2021, employers must allow part-time employees who work at least 500 hours per year for 3 consecutive years to participate in 401(k) plans. These employees will be excluded from nondiscrimination and coverage testing and top-heavy rules.

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