In the recent case of Anderson Equip. Co. v. Unemployment Comp. Bd. of Review, 994 A.2d 1192 (Pa. Commw. Ct. 2010) (pdf), the Commonwealth Court of Pennsylvania examined whether an employee engages in willful misconduct when he fails to pay union fees and dues in violation of his employer’s collective bargaining agreement (CBA).  The court held that the employee engaged in willful misconduct by failing to pay his union dues and that the employee did not have good cause for his misconduct.  Thus, the court found that the employee was not entitled to unemployment benefits.

The CBA between the employer and the union required all employees to be members of the union, and prohibited the employer from employing non-union members for more than 90 days. The employee in Anderson Equip. Co. failed to join the union because he claimed he did not have the money to pay the union initiation fees and union dues. The employee attempted to work with the union to establish a payment plan, but was unsuccessful. After several months and several warnings, the employer fired the employee for his failure to secure his union membership.

Under the Pennsylvania Unemployment Compensation Law, an employee is not eligible for unemployment compensation benefits if he or she is discharged for willful misconduct. Willful misconduct includes a disregard for the employer’s interest, a deliberate violation of work rules, the disregard of standards of behavior expected of employees, or a substantial and intentional disregard for the employer’s interest or the employee’s duties and responsibilities. If the employer proves that the employee engaged in willful misconduct by deliberately violating a work rule, the employee can attempt to establish good cause for the violation. Good cause is established if the employee acted justifiably and reasonably under the circumstances.

In Anderson Equip. Co., the primary issue was whether the employee’s inability to pay the fees and dues was good cause for violating the work rule. The court found that the employee’s inability to pay the fees did not constitute good cause because the former employee could have saved the necessary money during his 90 day probationary period. The court held that the employee had advanced notice of the need to pay the fees and dues, but he decided instead to violate the rule by not paying to join union. Because his inability to pay the fees was not justification for his violation of the rule, the employee was not eligible for unemployment benefits.

This case provides a good summary of the rules associated with willful misconduct under the Pennsylvania Unemployment Compensation Law in conjunction with union membership issues. The case also provides some positive news for employers who may find themselves between a rock and a hard place when forced to discharge employees who fail to pay their union fees and dues.
 

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group.

Our June 17, 2010 posting discussed the interim regulations on "grandfathered" health plan status under the Patient Protection and Affordable Care Act ("PPACA") and the benefits of maintaining that status.  Grandfathered plans are exempt from a host of statutory requirements that apply only to non-grandfathered plans.  Until recently, little was known about the additional statutory requirements that apply to non-grandfathered plans.  However, the Internal Revenue Service, the Department of Health and Human Services and the Department of Labor (referred to collectively as "the agencies") recently issued interim regulations which explain two of the most significant requirements: (1) the internal claim and appeal and external review processes; and (2) availability of certain preventive health services at no cost.  These new requirements will take effect for plan years beginning on or after September 23, 2010.

Internal Claims and Appeals and External Review Processes

On July 23, 2010, the agencies jointly published interim final regulations governing a plan’s internal claims and appeals procedures and external review processes.  The interim regulations require that non-grandfathered group health plans and health insurance issuers offering such plans have an internal claim and appeal procedure which complies with existing Employee Retirement Income Security Act ("ERISA") regulations (29 C.F.R. §2560.503-1).  However, the interim regulations impose several additional requirements over and above existing ERISA regulations, including expedited notification of benefit determinations involving urgent care within 24 hours and additional notice requirements.

Non-grandfathered plans also are subject to external review of claims appeals.  Currently, 44 states have laws providing some level of external review.  Plans operating in states which already have laws that afford at least the same level of consumer protection as the Uniform Health Carrier External Review Model Act will satisfy the external review requirement.  The Model Act is a template statute published by the National Association of Insurance Commissioners ("NAIC").  Plans operating in states that have not adopted Model Act will be subject to either a state-run external review process that complies with the new interim regulations or a comparable federal review process.  Pennsylvania state law allows for review of claims only under managed care plans; this process will either be expanded by amendment of the state law or supplemented by the federal review process set forth in the new interim regulations.

Preventive Health Services 

PPACA requires that certain preventive health services be made available under non-grandfathered plans at no cost to participants.  On July 19, 2010, the agencies issued interim regulations regarding this requirement.  The new regulations prohibit plans from imposing any cost-sharing requirements (e.g. copay, co-insurance or deductible) on any of the following:

  1. Services that have a Grade A or B rating in the current recommendations of the United States Preventive Services Task Force with respect to the individual involved.  The current Grade A and B rating recommendations are included in the preface to the interim regulations and currently include 45 services, including screening for alcohol misuse, high blood pressure, breast cancer, cholesterol abnormalities, colorectal cancer, depression, diabetes, hepatitis B, obesity and sexually transmitted diseases.
  2. Certain immunizations recommended by the Centers for Disease Control ("CDC");
  3. Certain screenings recommended by the Health Resources and Services Administration.

Office visits to obtain free preventive services may be subject to cost-sharing only if the visit is billed (or tracked) separately from the preventive service provided or if the service was not the primary purpose of the visit.  Plans are not required to waive cost-sharing requirements for services rendered out-of-network.  Plans are permitted to use reasonable medical management techniques to determine the frequency, method, treatment or setting for a preventive service covered under the regulations.

These new interim regulations are the first of a series that explain the statutory requirements that apply solely to non-grandfathered plans.  We will keep you apprised as additional regulations are issued.  For additional information regarding health care reform, please click here to view the McNees Whitepaper regarding What Employers Need to Know about Health Care Reform.

On May 3, 2010, we posted information about what was then a little known provision of the Patient Protection and Affordable Care Act (PPACA) (pdf): the requirement that employers provide reasonable unpaid breaks for nursing mothers to express breast milk. Recently, the Department of Labor issued Fact Sheet #73: Break Time for Nursing Mothers under the FLSA (the "Fact Sheet"). The Fact Sheet clarifies the unpaid break provision of the PPACA. 

Essentially, the PPACA requires that employers provide reasonable, unpaid break time and a private space for mothers to express breast milk for children up to one year in age.  There is an exemption for small employers, those with fewer than 50 employees, if the PPACA’s requirements would pose an undue hardship. 

The Fact Sheet clarifies that employers need not provide the break to those employees who are considered FLSA exempt. It also makes clear that while the breaks are unpaid, if employees are not completely relieved from duty during the breaks, then they must be compensated for the time.

The Fact Sheet also clarifies that the private space to be provide does not have to be dedicated solely to breast feeding. However, if it is not, the space must be available when needed, as well as shielded from view and free from intrusion from coworkers and the public. 

The Fact Sheet also states that the small employer "undue hardship" exemption will be analyzed by examining the difficulty or expensive of compliance, with reference to "the size, financial resources, nature and structure of the employer’s business." 

Employers should evaluate their practices with regards to breaks for breastfeeding mothers to ensure compliance with the PPACA, as clarified by the Fact Sheet.  

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group, and Stephen R. Kern, Esq., a Member in the Employee Benefits Practice Group.

Many of the requirements in the Patient Protection and Affordable Care Act ("PPACA") will have little meaning until federal agencies issue regulations that clarify the statutory language.  The Department of Health and Human Services, Department of Labor and Internal Revenue Service are all charged with issuing regulations to implement the Act.  Since May, these agencies have issued a steady stream of interim regulations regarding a number of the Act’s requirements.  Most recently, on June 22, 2010, the agencies jointly issued interim regulations to implement what have been referred to as the "Patient’s Bill of Rights" provisions of PPACA.  The following provisions will take effect in plan years beginning on or after September 23, 2010.

Preexisting Condition Exclusions 
PPACA prohibits a group health plan from imposing any preexisting condition exclusion ("PCE") on any individual under the age of 19. The age limit is eliminated for plan years beginning on or after January 1, 2014. In the interim, HIPAA’s current PCE rules apply. The interim regulations accept the HIPAA definition of a preexisting condition as a health condition or illness that was present before an individual’s effective date of coverage in the health plan, regardless of whether any medical advice was recommended or received before that date. A PCE is any limitation or exclusion of benefits (including a denial of coverage) that applies to an individual due to the individual’s health status before the effective date of coverage under the health plan. A benefit limitation or exclusion is not a PCE, however, if it applies regardless of when the condition arose relative to the effective date of coverage. 

Continue Reading Health Care Reform Update: Interim Regulations Issued for “Patient’s Bill of Rights” Requirements

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group.

As part of the Patient Protection and Affordable Care Act, Congress established a $5 billion pool to serve as a temporary reinsurance program for employer health plans (insured and self-funded) that provide coverage for eligible early retirees between the ages of 55 and 64.  The program is intended to reimburse plan sponsors for 80% of the cost of an eligible enrollee’s benefits between $15,000 and $90,000. This program will cease upon the earlier of 2014 or depletion of the $5 billion reinsurance pool. Payments are on a first come, first served basis and some believe that the reinsurance pool could be depleted in a matter of days.

As discussed in our June 6, 2010 blog post, the Department of Health and Human Services ("HHS) issued interim final regulations (pdf) on May 5, 2010, which set forth the eligibility requirements a plan must meet in order to participate in the program.  However, those regulations did not include a final application that plans could use for purpose of applying for the funds. 

On June 29, 2010, HHS issued a final application for this purpose and announced that applications are now being accepted.  To view the application and related materials, including "Do’s and Don’ts" for submitting the application, click here. 

Since funds are awarded to plans on a first come, first served basis, interested plans should complete and submit the application as soon as possible.

For additional information regarding health care reform, please click here to view the McNees Whitepaper regarding What Employers Need to Know about Health Care Reform. In addition, we will post additional articles on this blog as other regulations are issued.

On June 17, 2010 the United States Supreme Court issued the highly anticipated decision City of Ontario v. Quon (pdf). The case was closely watched by many in the human resources and employment law spheres because it was thought that the case would shed valuable light on employees’ privacy rights in the area of employer-provided electronic devices. The Court admitted that the case raised issues of "far-reaching significance," but nonetheless unanimously decided the case on previously established legal principals, and left many questions unanswered.

Quon was appealing for many reasons, not the least of which were the facts of the case. In 2001, the City of Ontario, California, Police Department issued members of the SWAT team two-way pagers in an effort to help the team mobilize and respond to emergencies quickly. The City had a contract with Arch Wireless Operating Company (Arch), also a party to the litigation, to provide wireless services for the pagers. The City’s "Computer Usage, Internet, and E-Mail Policy" applied to text messages sent via the pagers, and the policy specifically put employees on notice that they should have no expectation of privacy or confidentiality.

Quon and other officers exceeded the monthly text message limit many times, but a Lieutenant informed Quon, and others, that if they paid for the excess text messages, he would not audit the text message records to determine whether the excess messages were work-related or personal. Quon and other officers took advantage of this opportunity and paid for the excess text messages. After several months, the Chief of Police determined that an audit should be conducted to determine whether the text message limit was too low, or whether the officers were using the pagers for personal reasons too often. The audit revealed that Quon was "sexting" his wife and his mistress while on duty. Presumably, Quon was disciplined for his actions.

Quon and others filed suit against the City, the Department and the Chief, alleging that the audit violated their Fourth Amendment right to be free from unreasonable searches. Quon also filed suit against Arch, alleging a violation of the Stored Communications Act, because Arch turned over the transcripts of the text messages to the Chief. The Ninth Circuit Court of Appeals reversed the District Court (pdf) and held that the City, the Department and the Chief did in fact violate Quon’s Fourth Amendment rights, and held that Arch violated the Stored Communications Act by turning over the text transcripts.

The Supreme Court agreed to review the case only on the Fourth Amendment issue, and therefore, the Stored Communications Act judgment against Arch Wireless remains intact. The Court made many assumptions in its decision, and therefore failed to answer many questions presented by the case. Instead, the Court focused on one narrow issue, i.e. whether the search was "reasonable," to determine the outcome. The Court determined that the review of Quon’s text messages was reasonable, and therefore, not a violation of the Fourth Amendment.

In order to be reasonable, a public sector employer’s work-related search must be justified before the search, and the search must be reasonably related to the justification and cannot be excessively intrusive. The Court held that the search of Quon’s records was justified because many officers exceeded the text message limit, and the Chief needed to determine whether that was because the limit was too low, or because the officers’ personal usage was too high. The Court also concluded that the scope of the search was appropriately limited. Importantly, the Court noted that it would not have been reasonable for Quon to have concluded that his messages were in all circumstances immune from review. Thus, the search was justified and not excessive, and therefore, there was no Fourth Amendment violation.

While the Quon decision was highly anticipated for many reasons, including the interesting facts and the potentially far-reaching implications of any decision outlining employees’ privacy rights in the workplace, it left many observers wanting more. The decision did leave the door open for both employees and employers to further define the landscape of employees’ privacy rights in the workplace, and dropped clues as to what the Court will consider when the issue of employee privacy appears again.

In addition, the decision was important for public sector employers that provide electronic communication devices to employees. Public sector employers are permitted to "search" electronic records when the search is justified and appropriately limited in scope to the justification. In other words, although not every search is permissible, a well-justified and well-tailored search will not be found to be a violation of the Fourth Amendment.

Finally, all employers, public and private, should make certain that supervisors and managers are properly trained regarding policies related to electronic resources and devices to ensure that they are not waiving any of the employer’s rights to enforce the policy. Therefore, all employers should review the Court’s decision and determine what, if any, policy and procedure changes are necessary. 

Executive Order 13496, requires federal contractors to post a notice regarding employee rights under the National Labor Relations Act, among other things. The Department of Labor (DOL) recently issued final regulations (pdf) implementing the Executive Order.

Who is covered by the posting requirement?
Prime contracts under $100,000 and subcontracts under $10,000 are not covered by the notice requirements. In addition, government contracts resulting from solicitations issued before June 21, 2010 are exempt. However, it is possible that an exempt contract may nevertheless contain a provision requiring the posting – so careful review of all recent and future federal contracts and subcontracts for this requirement is advisable.

What is the posting requirement?
Covered contractors are required to post a notice "of such size and in such form, and containing such content as the Secretary of Labor shall prescribe…" In other words, contractors don’t have the discretion to alter the form of the DOL poster. The DOL poster is currently in two forms:  a one-page 11"x17" version or a two-page 11"x8.5" format.

When does the Executive Order take Effect?
Covered contractors are required to comply by June 21, 2010.

Where must the notice be posted?
The DOL regulations issued state that the notice must be posted:

  • "In conspicuous places in and in and about the contractor’s…offices so that the notice is prominent and readily seen by employees…[including, but not limited to]…areas in which the contractor posts notices to employees about the employees’ terms and conditions of employment";
  • "Where employees covered by the National Labor Relations Act engage in activities relating to the performance of the [federal] contract" (i.e. work that fulfills a contractual obligation or facilitates performance of the contract or jobs for which the cost or a portion of the cost is allowable as a cost of the contract);
  • A contractor that "customarily posts notices to employees electronically must also post the required notice electronically."

Compliance may require posting in multiple locations (at a minimum, with other postings and where employees performing contract work perform their jobs), electronically and in other languages if a "significant portion" of the contractor’s workforce is not proficient in English.

What happens to contractors that fail to comply?
The Office of Federal Contract Compliance Programs (OFCCP) will enforce the Executive Order, and may conduct "evaluations" to determine whether a contractor is in compliance. In addition, employees and individuals may file complaints with the OFCCP or the Office of Labor-Management Standards. If a contractor is found to be in violation, the OFCCP will first seek voluntary compliance. If a contractor still fails to comply, then further action will be taken, including the issuing of a cease and desist order and other "appropriate remedies," which may include penalties and sanctions, including the suspension, cancellation or termination of the contract and even disbarment.

Federal contractors, subcontractors and potential contractors should carefully review Executive Order 13496 and ensure compliance with all of its provisions.

The Internal Revenue Service ("IRS") recently released a revised Form 941, the Employer’s Quarterly Federal Tax Return, and related instructions to guide eligible employers in claiming the payroll tax exemption offered under the Hiring Incentives to Restore Employment ("HIRE") Act (H.R. 2847). The HIRE Act offers a tax exemption from having to pay the employer’s 6.2% share of social security tax on the wages paid to a qualified employee from March 19, 2010, through December 31, 2010. In order to receive this tax benefit for qualified new hires, employers must claim the exemption on their quarterly federal tax returns, beginning with the second quarter of 2010. The exemption applies to wages paid to qualified employees from March 19, 2010, through December 31, 2010.

President Barack Obama signed the HIRE Act into law on March 18, 2010. As detailed in our blog post, HIRE Act Provides Employers with Tax Incentives for Hiring and Retaining Qualified Employees, the HIRE Act amended the Internal Revenue Code to provide tax incentives for employers to hire unemployed workers. Specifically, the HIRE Act created two new tax benefits for eligible employers: the aforementioned payroll tax exemption for certain new hires, and a tax credit for retaining the qualified new hires. The IRS previously released a sample affidavit form, which employers’ qualified hires must complete as part of the qualification process for the tax exemption. The newly-released Form 941 will allow qualifying employers to claim the HIRE Act tax exemption on their Quarterly Tax Returns. Employers must claim the retention tax credit on their 2011 tax returns.

For additional information on the tax benefits offered under the HIRE Act, and related qualifications, visit the IRS’s website to read their Frequently Asked Questions regarding the HIRE Act tax benefits, or contact one of the attorneys in McNees Wallace and Nurick LLC’s Labor and Employment Practice Group. 

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group.

The Patient Protection and Affordable Care Act ("PPACA" or the "Act") is by far the most wide-reaching new law governing employee benefits since the Employee Retirement Income Security Act ("ERISA") was passed in 1974. During the legislative process that led to passage of the sweeping health care reform legislation, it was proposed that plans already in existence on the date of passage be "grandfathered," or exempted, from the Act’s requirements. The concept of "grandfathering" is included in the Act; however, grandfathered plans are only exempt from some of the Act’s requirements. This article briefly discusses the meaning and advantages of grandfathered status and the recent interim federal regulations governing the maintenance of grandfathered status.

What is a grandfathered plan under PPACA?
A grandfathered plan is a health plan that was in existence on the date PPACA was passed – March 23, 2010. Under recently issued interim federal regulations, a plan must have "continuously covered someone since March 23, 2010" in order to be grandfathered.

What are the benefits to an employer of having a grandfathered health plan?

  1. Grandfathered plans are exempt from some, but not all, of PPACA’s requirements. For example, grandfathered plans are exempt from:  the Act’s mandate for plans to offer certain free preventive health services;
  2. The extension of rules prohibiting discrimination in favor of highly compensated employees to insured plans;
  3. The establishment of an external review process for benefit claim appeals;
  4. The prohibition against pre-authorization requirements for OB/GYN and emergency services;
  5. New Department of Health and Human Services ("HHS") reporting requirements regarding plan efforts to improve participant health, safety and wellness;
  6. New HHS reporting requirements regarding claim payment policies, enrollment/disenrollment, claim denials and cost sharing; and
  7. Certain cost-sharing restrictions. In addition, grandfathered plans have delayed compliance deadlines for several of the Act’s requirements (e.g., restrictions on annual benefit limits). 

Is it possible to lose grandfathered plan status?

Although a health plan can avoid having to comply with a number of PPACA requirements by maintaining grandfathered status, that status can be lost.  On June 11, 2010, the Internal Revenue Service, HHS and the Department of Labor jointly issued "interim final rules" outlining the ways in which a grandfathered plan can lose its status.  These regulations are extremely restrictive and are likely to trigger significant "pushback" from the employer community.  It is entirely possible that the interim rules will be overhauled before being issued in final form.  However, for present purposes, the interim rules are the only formal guidance available on this point.

Continue Reading The Advantages of Having “Grandfathered” Health Plan Status Under PPACA (And How to Lose That Status)

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group.

The Patient Protection and Affordable Care Act ("PPACA" or the "Act") (pdf), commonly referred to as the "health care reform law," is nearly 900 pages long and imposes a multitude of new requirements on employers and their group health plans. Yet, despite its length, the Act leaves many basic questions regarding its requirements unanswered. For example, employers that seek to comply with the Act’s requirement regarding the provision of unpaid breaks for mothers to express breast milk for children up to one year of age do not yet know how many breaks must be provided per day or how long the breaks must be. Similarly, group health plans that are "grandfathered," and therefore exempt from certain of the Act’s requirements, do not yet know what types of plan amendments jeopardize grandfathered status. Important questions like these will likely be addressed over the course of the next several months, and years, in federal regulations. In May 2010, federal agencies issued the first wave of "interim" regulations under the Act.

Interim Final Rules Relating to Dependent Coverage of Children to Age 26 The Act requires all group health plans, regardless of grandfathered status, to extend dependent coverage to children until they reach age 26. This requirement goes into effect for plan years beginning on or after September 23, 2010 (i.e. January 1, 2011 for calendar year plans). Grandfathered plans may exclude an employee’s child who is over the age of 19 if he has other employer-provided coverage available – other than through one of the child’s parents. However, this limited exclusion does not apply to non-grandfathered plans and the exclusion will be eliminated altogether in 2014.

On May 10, 2010, the Internal Revenue Service, Department of Labor and Department of Health and Human Services jointly issued "interim final regulations (pdf)" governing the extension of dependent coverage. The regulations expressly prohibit group health plans from denying or restricting coverage to dependents under the age of 26 on the basis of residency, student status, employment status or financial dependency. The regulations also clarify that the extension of coverage does not apply to the grandchild of an employee.

Although plans may charge an employee more for coverage as the number of his or her covered dependents increase, the regulations prohibits plans from varying the terms of dependent coverage based on age (unless the dependent is 26 or older). In other words, a plan may not charge more to cover a 25-year old dependent than it does a 5-year old. Similarly, older dependents cannot be offered fewer plan options than younger dependents.

Under the regulations, dependents under the age of 26 who previously lost coverage or who were denied coverage due to their age must be given an opportunity to enroll in the plan. The enrollment opportunity must begin no later that the plan’s first plan year beginning on or after September 23, 2010 and must last at least thirty days. In addition, a written notice of this opportunity must be provided to the dependent or to the employee-parent. It may be included as part of other enrollment materials; however, the notice must be prominent.

Interim Final Rules Relating to PPACA’s Early Retirement Reinsurance Program The Act also created a temporary reinsurance program for employer health plans (insured and self-funded) that provide coverage for eligible early retirees between the ages of 55 and 64.

Continue Reading Federal Agencies Issue First Wave of Health Care Reform Regulations