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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We have been following litigation in Pennsylvania challenging the use of payroll debit cards by employers to pay employees. In one such case, the Pennsylvania Superior Court recently ruled that an employer violated the Pennsylvania Wage Payment and Collection Law (WPCL) by requiring employees to accept their wages on a payroll debit card, rather than in cash or by check.

The Pennsylvania General Assembly has stepped in to modernize the law and bring some welcome clarity to this issue. On November 4, 2016, Governor Tom Wolf signed into law Act 161, which amends the Pennsylvania Banking Code to expressly permit the use of payroll debit cards, with certain conditions.  These conditions include the following:

  • Payment of wages by payroll debit cards must be optional for the employee, and the employer cannot mandate such use to receive wages;
  • The employer must comply with various notice and authorization requirements;
  • The card must allow one free withdrawal of wages each pay period and one in-network ATM withdrawal at least weekly;
  • The employee must have the ability to check the card’s balance electronically or via telephone without cost to the employee; and
  • There must be no fees associated with various actions associated with the card, including the issuance of the initial card and one replacement card per calendar year, the transfer of wages to the card itself, and for non-use of the card for a period of less than 12 months.

The Act makes clear that it supercedes any inconsistent provision in any other statute, rule, or regulation, confirming that payment of wages with a payroll debit card in compliance with the Act’s requirements will comply with the WPCL. The Act will take effect in 180 days of its enactment on November 4.

For employers who wish to use payroll debit cards to pay wages, Act 161 provides a blueprint for how to do so in a manner that complies with Pennsylvania law. These requirements are somewhat complicated, however, and should be followed closely. Also, Act 161 confirms that use of payroll debit cards in a manner inconsistent with its requirements will violate Pennsylvania law. Employers who wish to use this new technology to pay employees should keep these points in mind to avoid future legal trouble.

Back on September 7, 2015, President Obama signed Executive Order 13706, which requires that certain federal contractors provide their employees up to fifty-six hours of paid sick leave per year. In February of this year, the United States Department of Labor issued proposed rules to implement the Executive Order, and it invited public comment on recommended changes. Our blog subscribers may remember that we posted an outline of the requirements under the proposed rules in March. You can find that blog post here. Following the submission of over 35,000 comments, the Department of Labor issued the final rules on September 30, 2016, leaving the proposed rules largely untouched. The final rules become effective on November 30th and apply to new contracts entered into after January 1, 2017 (except those unilaterally renewed by the government pursuant to a pre-negotiated option).

In the aftermath of last Tuesday’s election, we now know that Donald Trump will assume the Presidency on January 20, 2017. Your feelings about the outcome of the election aside, we know two important things about President-Elect Trump that are relevant to federal contractors: (1) he is of a political ilk quite different than President Obama; and (2) because of his contra political affiliation, he has promised to rescind most, if not all, of President Obama’s executive orders. So, with paid sick leave regulations set to go into effect, and a President-Elect who has promised to rescind such an order, what is a federal contractor supposed to do?

In short – comply with the regulations. Why? First, the regulations go into effect before President-Elect Trump is even sworn into office. Thus, the regulations will be binding on covered federal contractors and will have the same force and effect as all other regulations. Second, there is no certainty that President-Elect Trump will actually rescind Executive Order 13706. While he has spoken generally about rescinding President Obama’s executive orders, he has not specifically referenced the paid sick leave order. Indeed, during his campaign, President-Elect Trump announced a plan for six weeks of paid maternity leave. Such a plan would largely be at odds with rescinding Executive Order 13706, which requires paid leave be permitted for the same purpose. Third, assuming he does actually intend to rescind Executive Order 13706, it is not likely to happen early in his presidency. He has published his plan for the first one-hundred days of his term; paid sick leave is not on list.

Although federal contractors should comply with the regulations, contractors may want to reevaluate their compliance strategy in the short term. For example, the regulations provide that contractors must allow employees to accrue up to fifty-six hours of paid sick leave over the course of a year. Alternatively, a contractor, in lieu of calculating the accrual of paid sick leave, can simply give employees all fifty-six hours at the beginning of the year. Both methods have pros and cons. The accrual method has administrative costs associated with tracking hours worked, but the regulations allow a contractor to limit the number of hours an employee has available for use. The up-front method has no administrative cost for tracking hours, but the regulations provide that contractors cannot limit the number of hours an employee has available for use. A contractor, considering the long-term costs and benefits, may choose, for example, to select the up-front method because the cost associated with the accrual method, for them, outweighs the benefit of limiting the availability of use. But the same may not be true in the short term. Thus, given the potential that the Executive Order may ultimately be rescinded in the next few years, a different strategy may be appropriate.

So, if you are a federal contractor that employs any of the 1.2 million employees that will ultimately be covered by the regulations, you should continue to plan, prepare, and implement your compliant paid sick leave policy. But, while you continue that process, it may be worth taking the time to reevaluate your strategy.

As regular readers of our blog know, we have been following a pending class action lawsuit challenging a Pennsylvania employer’s use of payroll debit cards to pay its employees. There has been a key development in that case.  The Pennsylvania Superior Court has issued a decision that affirmed that the employer at issue violated the Pennsylvania Wage Payment and Collection Law (WPCL) by requiring employees to accept their wages on a payroll debit card, rather than in cash or by check.

In Siciliano v. Mueller, a unanimous three-judge panel of the Superior Court noted that the Wage Payment and Collection Law authorizes payment of wages only “in lawful money of the United States or check.”  The Court concluded that the mandatory use of payroll debit cards that may subject users to fees was not consistent with the “plain language” of the WPCL.  While the Court noted that “[t]he use of a voluntary payroll debit card may be an appropriate method of wage payment,” it confirmed that mandatory use of cards that may trigger fees is not under current Pennsylvania law.

Unless and until the Superior Court’s decision is overturned or the General Assembly amends the WPCL to expressly authorize payment of wages via payroll debit cards that may trigger fees, their use in Pennsylvania presents risk for employers, particularly if employers do not give employees other options to receive their wages.  Pennsylvania employers should consider these risks when determining whether and to what extent they wish to use payroll debit cards, at least until the law is changed.

In a recent decision, the National Labor Relations Board confronted the issue of whether it has jurisdiction over The Pennsylvania Virtual Charter School (PVCS) – a school formed pursuant Pennsylvania’s Charter School Law. In addressing the issue, the Board was confronted with two questions: (1) whether the school was exempt from the National Labor Relations Act (the “Act”) as a political subdivision; and (2) if the school was not exempt, whether the Board should nevertheless exercise its statutorily-granted discretion to decline jurisdiction. It answered both questions with a resounding “no.”

Political Subdivision Exemption

Political subdivisions are excluded from the list of “employers” subject to the Act. According to the Supreme Court of the United States, an entity is a “political subdivision” if it was created directly by the state, so as to constitute departments or administrative arms of government, or it is administered by individuals who are responsible to public officials or to the general electorate.

Applying this test, the Board held that PVCS was not created directly by the Commonwealth of Pennsylvania, but was a created by private individuals that formed a non-profit corporation. To reach this conclusion, the Board asked whether PVCS was created by a governmental entity, legislative or judicial act, or public official. It found that the answer was no. The Board found it largely irrelevant that: (1) the school’s charter was – as it must be under the Charter School Law – issued by the Pennsylvania Department of Education; (2) PVCS received ninety-seven percent of its funding from the Commonwealth of Pennsylvania; and (3) the Charter School Law places employees of cyber charter schools within Pennsylvania’s public employee labor relations system.

Moreover, the Board found that PVCS was not administered by individuals who are responsible to public officials or the general electorate. Under this prong of the political subdivision test, the Board examined if the administrators are individuals appointed by, or subject to removal procedures applicable to, public officials. PVCS’ board of trustees were appointed and removed pursuant to the school’s bylaws. The bylaws provided that sitting board members appoint and remove other board members, and only board members appoint and remove administrators. Under the Charter School Law the board members are statutorily deemed “public officials.” The Board held that despite the Charter School Law’s designation of the board members as “public officials,” they were not public officials for purposes of the Act. It reasoned that “PVCS’ board was created and governed by its internal bylaws (the first board was selected by the private citizens . . .) and is a self-perpetuating entity.” Accordingly, the Board found that PVCS was not administered by individuals responsible to public officials or the general electorate and was not a political subdivision.

Declination of Jurisdiction

Having concluded that PVCS was not exempt as a political subdivision, the Board finally examined whether it would nevertheless exercise its discretion to decline jurisdiction. PVCS argued that the Board should decline jurisdiction because cyber charter schools do not have a substantial effect on commerce and exercising jurisdiction would supplant state control. The Board found that PVCS had 3000 students, it had an operating budget in the millions of dollars each year, and it was only one of fourteen cyber charter schools in Pennsylvania. As a result, the Board determined that there was sufficient impact on commerce to justify maintaining jurisdiction. Additionally, the Board concluded that its jurisdiction would not supplant state control because charter schools are not state schools, but an alternative permitted by the Commonwealth of Pennsylvania. As such, it held that PVCS should be subject to the same federal regulations as other private employers.

It is noteworthy that the Board reached the same conclusion with respect to charter schools in New York. You can find the full PVCS opinion here. You can find the New York opinion here.

Our regular blog subscribers will note that we have routinely commented on the Board’s increasing efforts to expand its jurisdiction. This is yet another instance. Why does this matter? Even though your business may not be a charter school, it is a reminder that the Board is continuing its aggressive expansion of the Act.