Employment and Benefits Law Update

An Employment &

Benefits Law Update

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White Collar Exemptions Overtime Pay and More

Bob Horton

Tim Garrett

Lymari Cromwell

Stephanie Roth

White Collar Exemptions

Includes:

► Executive

► Administrative

► Professional

► Outside Sales

► Computer Employees

► Highly Compensated Employees

Requires:

► Paid on a salary basis (exceptions for outside sales and computer employees) at certain level

► Certain job duties

Salary Level Test

Increase To $913 Per Week

► 40th percentile of weekly earnings for salaried workers

► $47,476 annually

► Increase from current level of $455/week or $23,660/year

► “HCE” salary level to $134,004 per year

Automatic Increases Every 3 Years – based on lowest wage census region

Effective December 1, 2016

What Did Not Change?

Job Duties

► Had invited comment

Definition of “Paid on Salaried Basis” Except:

► Other forms of pay can satisfy up to 10%

► Quarterly (or more frequent) nondiscretionary bonuses, incentive pay, and commissions

► Rules for making up shortfall

No change in exceptions for outside sales, lawyers, doctors

Some “Good” News

Lower salary level than expected

Delayed effective date

Opportunity for audit and reclassification without typical “red flags”

Other compensation can be included

No change in duties

► But likely was considered

► Keeping the “concurrent” concept likely triggered high salary component

Next Steps and

Possible Impact

Audit – Evaluate Options for Those Below Salary Level

Keep Same Hours and Same Pay

► Re-Classification to non-exempt

► Pay overtime on hours worked over 40/week

Keep Same Pay, Decrease in Hours Worked

► Excess hours now passed to other/new positions

► Try to “limit” overtime

Increase Salary to Meet New Threshold, Job Otherwise Unaffected

Next Steps and

Possible Impact Re-Classify and Decrease Hourly Rate to Approximate Same Pay

► Estimate overtime hours

► Reduce hourly rate to keep pay same

Re-Classify to Non-Exempt

► Morale Issue

► Keep up with hours worked

► Changes in benefits possible

Streamlined Management Structure

“Ripple Effect” if Salary Increased

“Limit” Overtime Increases Work Off Clock Risk

Other Options Available

Salary with Overtime Pay – Non-exempt

► At 1.5 times

► At “hybrid” (0.5 times and 1.5 times)

Fluctuating Workweek Pay – Non-exempt

► Must have a “clear understanding” (put in writing)

► Hours must truly fluctuate

► Must be paid on a salary basis

► Hours over 40 compensated at 0.5 times the effective hourly rate for that week

Federal Guidance on

Restroom Access for

Transgender Employees

EEOC Fact Sheet: Bathroom Access Rights

for Transgender Employees Under Title VII

Fact Sheet released in May 2016

Transgender: people whose gender identity and/or expression is different from the sex assigned to them at birth

► Surgery/medical procedures not necessary to be considered transgender

Macy v. Dep’t of Justice, 2012: EEOC rules that discrimination based on transgender status is a form of sex discrimination under Title VII

EEOC Fact Sheet: Bathroom Access Rights

for Transgender Employees Under Title VII

Lusardi v. Dep’t of the Army, 2015: EEOC rules that:

► Denying transgender employee access to common restroom corresponding to the employee's gender identity is sex discrimination;

► Employer cannot condition this right on the employee undergoing or providing proof of surgery or any other medical procedure;

► Employer cannot force the transgender employee to use a single-user restroom; and

► Anxiety, confusion and discomfort of other employees cannot justify discriminatory terms and conditions of employment.

According to the EEOC, contrary state law is NOT a defense under Title VII.

OFCCP Final Rule Regarding

Sex Discrimination

Issued June 2016

Federal contractors covered by EO 11246

Sex discrimination/harassment includes discrimination/harassment based on transgender status

Transgender employees must be allowed to use the restroom corresponding to their gender identity

OSHA: A Guide to Restroom

Access for Transgender Workers

Issued June 2015

OSHA’s Sanitation Standard 1910.141: Employers are required to provide employees with access to sanitary toilet facilities.

Employers may not impose “unreasonable restrictions” on employee use of sanitary facilities, and therefore, employees “should” be permitted to use the sanitary facilities that correspond with their gender identity.



Prohibiting transgender employees from using restrooms consistent with their gender identity, or segregating them by requiring them to use gender-neutral or other specific restrooms, “singles those employees out and may make them fear for their physical safety.”

Such restrictions may also result in employees avoiding using restrooms while at work, which can lead to “potentially serious physical injury or illness.”



Transgender employees should have access to the common restroom of their choosing

► It is unreasonable to require them to use a gender neutral restroom

► Employer may provide a gender neutral restroom as an option for employees

► May also provide multiple-occupant, gender-neutral restroom facilities with lockable single occupant stalls



Employer may replace common, sex-segregated restrooms with single-occupancy restrooms

Number of Employees Minimum # of Single Occupancy Restrooms

1 to 15 1

16 to 35 2

36 to 55 3

56 to 80 4

81 to 110 5

111 to 150 6

Over 150 1 add’l for each add’l 40 employees

Tips Treat transgender issues with the same sensitivity and caution as you would any other gender-based issue that arises in the workplace.

If you do not currently have transgender employees, be proactive. Develop a plan/policy to ensure that the matter is handled appropriately when the need arises.

Train management and HR.

Do not condition workplace changes on surgical/medical transition.

► For example, changing name, gender-specific pronouns, personnel records, bathroom access, etc.

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EEOC Final Rules on Employer

Wellness Programs

Susan Bilbro

Douglas Dahl

Stephanie Roth

Wellness Programs Overview

What are wellness programs?

► Health promotion and disease prevention programs and activities

► Offered to employees as part of an employer-sponsored group health plan or separately as benefit of employment

- Health risk assessment (HRA)

- Biometric screening for risk factors like high blood pressure or cholesterol

- Educational health-related information or programs

- Nutrition classes

- Weight loss programs

- Smoking cessation programs

- Onsite exercise facilities

Two Categories of Wellness

Programs

Participatory ► Reward not based on a health

factor

► Wellness requirements N/A

► Examples:

- Fitness center reimbursement

- HRA or screening, regardless of

results

- Smoking cessation program,

regardless of quitting

Health-Contingent ► Reward based on health factor

► Wellness rules apply

► Examples:

- “Activity-only” – walking program

or certain amount of weekly

exercise

- “Outcome-based” – reduce

cholesterol or blood pressure

Wellness Rules for Health-Contingent

Programs under HIPAA and ACA

Health-contingent programs must be available to all similarly-situated individuals and must:

► Be reasonably designed to promote health or prevent disease

► Give an annual opportunity to qualify for reward

► Limit the amount of reward/penalty to no more than:

- 30% of total cost of coverage; or

- 50% if designed to prevent/reduce tobacco use

► Provide a reasonable alternative standard (or waiver)

► Disclose availability of reasonable alternative standard in plan materials discussing program

How Does ADA Apply to

Wellness Programs?

ADA prohibits employers from discriminating against individuals on the basis of disability

Generally restricts employers from obtaining medical information from applicants and employees

► Exception: Employers can make inquiries about employee’s health or do medical exams that are a part of a “voluntary” employee “health program”

ADA requires employers to make wellness programs available to employees without regard to disability status, to provide reasonable accommodations, and to keep medical information confidential

EEOC Final Rule on Wellness

Programs and ADA

Final rule applies prospectively - applicable as of the first day of the first plan year that begins on or after January 1, 2017

Provides guidance on:

► What constitutes a “health program” – “reasonably designed”

► What constitutes “voluntary”

► Financial incentive limits

► Additional confidentiality requirements

Final ADA Rule on Wellness

Programs – Health Program

What is a “Health Program”?

► Includes medical examinations and disability-related inquiries

► Must be reasonably designed to promote health or prevent disease

► Would it be okay to ask employees to complete an HRA and/or undergo a biometric screening:

- For the purpose of alerting them to health risks?

- Without providing results, follow-up information or health advice?

- For the purpose of compiling aggregate information to design and offer health programs aimed at specific conditions?

- For the purpose of giving an employer information to estimate future health costs?


Programs - Voluntary

What is a “voluntary” health program?

► Does not require employees to participate

► Does not deny coverage under any employer group health plan or benefit package for non-participation or limit extent of benefits

- Could you allow employees who participate in a wellness program to enroll in a comprehensive health plan, while offering non-participants only a less comprehensive plan?

► Does not take any adverse action, retaliate against, or coerce employees who choose not to participate

► Provides written notice to explain what medical information will be obtained, how it will be used, who will receive it, restrictions on its disclosure, and the methods used to prevent improper disclosure


Programs – Financial Incentives

Incentives are limited to 30% of the total cost of self-only coverage. Specifically:

► If employee must be enrolled in a particular health plan to participate in the wellness program, incentive is limited to 30% of the total cost of the self-only version of the plan in which employee is enrolled

► If employee may be enrolled in any of the employer’s self-only health plans in order to participate, the incentive is limited to 30% of the lowest cost self-only health plan the employer offers

► If employer does not offer a health plan, but offers a wellness program open to all employees, the incentive is limited to 30% of the total cost to a 40-year old non-smoker purchasing self-only coverage under the second-lowest cost Silver Plan available to the employee on the Exchange


Programs – Financial Incentives

What about tobacco cessation incentives?

► 30% limit does not apply if the wellness program merely asks employees whether or not they use tobacco (or whether they ceased using tobacco by the end of the program)

- That is, employer can offer an incentive for these programs up to 50% of the cost of self-only coverage

► 30% limit does apply if employer requires biometric screening or other medical test for the presence of tobacco or nicotine

Final ADA Rule on Wellness Programs –

Reasonable Accommodations

Even if a wellness program does not include disability-related inquiries or medical examinations, employers must provide reasonable accommodations to enable employees with disabilities to earn whatever financial incentive the employer offers

► Covered entity would need to provide reasonable accommodations for both participatory and health-contingent wellness programs

► Example: if an employee can earn an incentive by attending a nutrition class, a sign language interpreter should be provided for a deaf employee


Programs – Confidentiality

Final rule adds two new requirements to existing ADA

regulations on confidentiality

An employer:

► May only receive information collected by a wellness program in

aggregate form that does not disclose, and is not reasonably

likely to disclose, the identity of specific individuals except as

necessary to administer the plan

► May not require an employee to agree to the sale, exchange,

transfer, or other disclosure of medical information or to waive

confidentiality protections under the ADA in exchange for an

incentive or as a condition for participating in a wellness

program, except to the extent permitted by the ADA

Final GINA Rule on Wellness Programs

GINA generally prohibits employers from using genetic information in making decisions about employment, and restricts employers from requesting, requiring, or purchasing genetic information

► Exception: Employers may acquire genetic information as part of voluntary health or genetic services offered to employees or their family members

Final rule applies prospectively - applicable as of the first day of the first plan year that begins on or after January 1, 2017

Clarifies an employer may offer a limited incentive for an employee’s spouse to provide information about the spouse’s current or past health status as part of a voluntary wellness program

Final GINA Rule on

Wellness Programs

Final GINA rule only applies where a portion of the wellness program incentive offered is for an employee’s spouse to answer questions about health status or to take a medical examination

► Does not apply where incentives are made available in exchange for an employee’s spouse engaging in certain activities (e.g., attending a weight loss program, exercising a certain amount each week) that do not require obtaining information about current or past health status

Wellness programs that ask for genetic information must be “reasonably designed” – similar requirements to ADA final rule

Financial incentives have the same limits as those under ADA final rule, but are in addition to any employee incentive, so that combined total inducement can be no more than twice the cost of 30% of self-only coverage

Final GINA Rule on

Wellness Programs Confidentiality – adds to existing provisions:

► Final rule prohibits employers from requiring an employee or spouse to agree to the sale, exchange, transfer, or other distribution of health information in exchange for an inducement or as a condition of participating in a wellness program

► Genetic information gathered as part of wellness program must be disclosed to employers only in aggregate terms

Other Revisions

► Final rule prohibits employers from denying access to health insurance or any package of benefits to, or retaliating against, any employee whose spouse refuses to provide information about his/her current or past health status to an employer wellness program

Affordable Care Act –

Nondiscrimination in Health

Programs and Activities

ACA – Nondiscrimination in

Health Programs and Activities

Agenda:

► Background of ACA Section 1557

► When is Section 1557 effective?

► Entities subject to Section 1557

► What does Section 1557 prohibit?

► What affirmative action does Section 1557 require?

► What next?

Employer Response

Background of ACA

Section 1557 Passed in 2010 as part of the initial ACA legislation

► 2 paragraphs in the 2700-page bill

► “I haven’t read every word of that, I promise,” Justice Stephen Breyer said to a lawyer arguing the case. “So what do you propose that we do other than spend a year reading all this?”

► Has been effective since 2010, but little is known about enforcement since then

In general, prohibits discrimination on basis of race, color, national origin, sex, age, and disability (Really Cool, No SAD) in any health program or activity

Background of ACA Section 1557

Statute directs Secretary of Health and Human Services to adopt regulations to implement requirement

Proposed regulations issued in September 2015

► Asked for public comment

Final regulations published by HHS on May 18, 2016

► 100 pages, including preamble

When is ACA Section 1557

Effective?

Section 1557 has been effective since 2010

Because of this, OCR is unwilling to delay effective date of final rules

Final rules are effective on July 18, 2016

Notice requirements effective 90 days later

However, if the rule requires changes to health insurance or group health benefit design, rule is effective first day of first plan year beginning on or after January 1, 2017

What entities are subject to

ACA Section 1557?

Rule applies to any:

► Health program or activity, any part of which receives “federal funding” (except Medicare Part B payments)

► Health program or activity administered by HHS, including Federal Marketplace

► Health program or activity administered by States (i.e., State Marketplaces)

► Entities subject to rules are called “covered entities”


ACA Section 1557

What constitutes “federal funding” that triggers the requirements?

► Any grant, loan, credit, subsidy, contract or any other arrangement where the federal government provides funds, federal personnel, or real or personal property.

► Limited to federal funding from HHS, for now


ACA Section 1557 What is a health program or activity?

► Includes providing or administering health-related services or insurance and providing assistance in obtaining same

► Importantly, all of the operations of an entity principally engaged in providing health programs or activities are considered “health programs or activities” for purposes of the rule

- Examples are hospitals, health clinics, community health centers, group health plans, health insurance issuers, physician’s practices, nursing facilities, etc.

- This means that an entity which receives federal funds for just one plan or activity is subject to the rule with respect to all of its activities


ACA Section 1557 Are employers in their capacity as employers subject to the rules?

► Employers are covered by the rule with respect to their own employee health benefit programs if:

- the employer is principally engaged in providing or administering health programs or activities (i.e., hospitals, physician practices, etc.)

- the employer received federal funds to fund the employer’s health benefit program (HHS funds to support employer wellness programs)

► Rules do NOT extend to hiring, firing, promotions, or terms and conditions of employment outside the employee health benefit program context

Group health plans themselves are subject to the rule if they receive federal funds from HHS (i.e., Medicare Part D Subsidies, Medicare Advantage)


ACA Section 1557 Does rule apply to a covered entity’s TPA services?

► Yes and No.

► Proposed regulations led many to believe that self-insured plans would be subject to rules if their TPA was a covered entity

► Final regulations say that where TPA is responsible for the decision or action alleged to be discriminatory (e.g., claim processing), the TPA will be subject to rules.

► On the other hand, where responsibility for the decision or action alleged to be discriminatory lies with the employer (i.e., benefit design), whether the employer is subject to the rules depends on whether the employer is a covered entity

► If employer is not subject to the rules, OCR has indicated it will refer the matter to other federal agencies that have authority (e.g., EEOC)

What discrimination does

ACA Section 1557 prohibit?

An individual shall not, on the basis of race, color,

national origin, sex, age or disability, be:

► Excluded from participation in,

► Denied the benefits of, or

► Subjected to discrimination under any health program

or activity

What this means – HHS’ existing rules under Title

VI, Title IX, Age Discrimination Act, Rehabilitation

Act apply to health programs/activities



As applied to health coverage, discrimination would include: denying or limiting coverage, denying a claim, imposing additional cost sharing, and using discriminatory marketing practices or benefit design

OCR did say:

► reasonable medical management techniques are allowed

► rules do not require coverage of any particular procedure or treatment



Examples

► Does not allowing mammograms to men and younger women, without a known family history, violate 1557?

- No

► TPA of self-insured plan denies a claim because an individual’s last name suggests a certain national origin. Does 1557 apply or referral of plan to EEOC?

- 1557 applies because TPA discretion



Sex Discrimination

► OCR said discrimination “on the basis of sex” includes:

- Pregnancy, false pregnancy, termination of pregnancy, childbirth or related medical conditions, sex stereotyping and gender identity

► Gender identity includes “gender expression” and “transgender status”

► OCR did not resolve whether discrimination on basis of sexual orientation violates Section 1557

- However, support as matter of policy


ACA Section 1557 prohibit? Sex Discrimination

► Under rule, (a) individuals cannot be denied access to health care or coverage based on their sex, (b) covered entities must treat individuals consistent with gender identity, and (c) automatic exclusion or limitations of all coverage related to gender transition is unlawful on its face

- In looking at a specific service related to transition care, OCR will start by asking whether service is available when not related to gender transition (e.g., hysterectomy)

- Determine whether explanation for denial is legitimate and not pretext for discrimination

- However, rules do not require coverage of any particular procedure/treatment for transition-related care



Sex Discrimination

► Rumble v. Fairview Health Services (unreported, D. Minn. March 16, 2015)

- Rumble, a transgender man, filed suit against hospital and physician group

- Came into ER with fever and genital pain

- Alleged that he was neglected, misgendered and subjected to an assaultive physical exam

- Defendants filed motions to dismiss

- Court said Rumble’s allegations, if true, could violate Section 1557



Examples

► Does requirement to treat individuals consistent with gender identity mean that pelvic exam can be denied for individual who identifies as a transgender male?

- No

- Illustrates exception to rule. Can’t deny service that is ordinarily available only to one gender just because an individual’s sex at birth or gender identity is different from the one to which services are ordinarily available



Examples

► Would a covered entity be required to provide a traditional prostate exam to a transgender male who doesn’t have a prostate?

- Common sense, no

► TPA of self-insured plan threatens to expose an employee’s transgender or disability status to employee’s employer. Violation of 1557 or referral to EEOC?

- 1557 violation because TPA discretion



Examples

► TPA of self-insured plan (which is a covered entity) denies gender transition surgery under plan which excludes coverage for all general transition services. Which entity violated 1557?

- OCR will address complaint against employer

► Hospital’s employee benefit plan publishes material intended to dissuade employees from seeking transition services. Violation of 1557?

- Most likely

ACA Section 1557

Religious exemption available under Section 1557?

► No

► OCR said certain protections already exist in Federal law regarding religious beliefs

- Specifically discussed abortion (Marketplace Plans, not essential health benefit)

► OCR did not adopt Title IX’s religious exemption

- Said there are significant differences between educational and health care contexts

► However, OCR made clear that where application of Section 1557 would violate federal protections for religious freedom/conscience, application not required

What affirmative action does

ACA Section 1557 require?

Federal financial assistance

► Submit written form assuring compliance with Section

1557

Responsible Employee and Grievance Procedures

► Each covered entity that employs 15 or more persons

- Designate one employee to coordinate compliance with

1557, including investigation

- Adopt grievance procedures, provide for prompt/equitable

resolution


ACA Section 1557 require? Language Services and Auxiliary Aids

► CE must provide language assistance services free of charge

► CE must offer qualified oral interpreters/translators to LEP individuals if providing would result in meaningful access to health care services

► CE must make communications with disabled individuals as effective as communications with others

► CE must post taglines (in either top 15 or 2 languages) alerting LEP individuals that language services are available

► Sample taglines provided


ACA Section 1557 require? Notice Requirement

► Final rule requires covered entities to take initial and continuing steps to notify beneficiaries, enrollees, applicants:

- That CE does not discriminate on basis of Really Cool, No. SAD in health activities

- That CE provides appropriate auxiliary aids/services where necessary and free of charge

- That CE provides language assistance services for LES

- Who is the CE’s compliance coordinator and how to file a grievance

- How to file a discrimination complaint with OCR

► Model Notice is provided

► Post in significant communications, in physical locations, on websites

What Next?

Employers should first identity whether they or their health plans are covered entities

If yes, employers should begin to determine what needs to be done to comply with language service and notice requirements

Draft and post/distribute notices

► Deadline is October 16, 2016

Close look at health programs or activities to determine any hidden discrimination

Speakers:

Susie Bilbro – [email protected]

Lymari Cromwell – [email protected]

Douglas Dahl – [email protected]

Tim Garrett – [email protected]

Bob Horton – [email protected]

Stephanie Roth – [email protected]

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