Employment Law Observer

Insight & Commentary on Employment & Agency Issues

Compliance: Employers closely watching Supreme Court’s ruling in Canning

Posted in NLRB, Opinion, United States Supreme Court

The Court’s ruling will likely define the scope of the president’s recess appointments power for future administrations.

It’s easy to identify recess in an elementary school day: The bell rings, the kids tumble out of class and the yard fills with playful shrieks and laughter.

Not so with Congress. The U.S. Senate’s chambers may be dark, official business on hold, the senators all home on vacation, and yet the legislative body may still be in session.

The issue of defining “recess” for the Senate lies at the center of NLRB v. Canning, a case currently before the U.S. Supreme Court. The outcome could have a significant impact on employers. At stake is the status of hundreds of National Labor Relations Board (NLRB) rulings on issues ranging from employee social media policies to the legally permissible scope of workplace rules relating to employer confidentiality, employee discipline and off-duty employee access to the workplace.

More broadly, the Court’s ruling will likely define the scope of the president’s recess appointments power for future administrations. Presidents must normally obtain Senate consent to fill federal agency board positions. The Constitution permits Presidents to unilaterally fill agency vacancies when the Senate is in recess, an anachronism to the days when Congress recessed for months at a time.

Read More

This article first appeared in InsideCounsel.

Obama Administration Delays Another Provision of Affordable Care Act

Posted in Affordable Care Act

The Obama administration will allow health insurers to continuing offering plans that fail to meet the Affordable Care Act’s (ACA) minimum requirements for another two years.

The extension, widely viewed as a political move to assist Democrats in the upcoming mid-term elections, applies to policies issued up to October 1, 2016.

Significantly, the change likely will not affect the estimated 900,000 Californians whose plans were cancelled under the ACA.  That’s because Insurance Commissioner Dave Jones declined to accept the President’s invitation last fall to allow insurers to continuing offering non-compliant policies through 2014.

The issue arose after it became apparent that approximately 4.7 million Americans would lose their insurance plans because they fell short of the ACA’s coverage mandates.  This created a public relations nightmare for President Obama, who had repeatedly promised that consumers could keep their exiting policies.

To stanch the damage, the administration allowed insurance companies to extend cancelled policies for one year, provided insurance commissioners and state regulators were on board.

In addition to California, states refusing to implement the president’s “fix” include New York, Massachusetts, Arizona, Colorado, Virginia, West Virginia, Oregon and Minnesota, as well as Washington, D.C.

Fewer Class Actions Remanded To State Court

Posted in 9th Circuit Court of Appeals, Case Updates, Class Actions, Wage & Hour

By Ali Reza Mokhtari Fox

The Daily Journal reported last week that new standards established by the Ninth Circuit in the 2013 case Rodriguez v. AT&T Mobility Services LLC have resulted in fewer wage and hour class action cases being remanded to state court.

Previously, under Lowdermilk v. United States Bank National Association, employer defendants were required to prove with “legal certainty” that there was at least $5 million at stake before the case could qualify for federal jurisdiction under the Class Action Fairness Act.  In Rodriguez the court reduced the standard to a simple preponderance of evidence.

As the Daily Journal reported, under the old standard many wage and hours cases were remanded to state court, but now the trend is toward cases staying in the federal court system.  The article quotes attorney Ken Sulzer as saying, “In the past, approximately 90% of these cases were remanded. . . .  The upshot is more of these cases will be kept in federal court.”  Sulzer is currently working on Woodward v. Healthcare Services Group Inc., in which the Ninth Circuit ordered U.S. District Judge Margaret M. Morrow to reconsider her decision to remand to state court because of the new standards.

Defense attorneys in general welcome the change because prior to Rodriguez, cases could be remanded for numerous, sometimes seemingly minor reasons.  Now in light of Rodriguez many observers think the game has been brought to a more level playing field, the Daily Journal reported.

While plaintiff’s attorneys would like to downplay the trend Rodriguez is creating, it appears at least for now that defense attorneys in wage and hour litigation have gained some ground in the ongoing struggle between removal and remand in class actions.

Obama Administration Relaxes Employer Mandate

Posted in Affordable Care Act

The moving target that is the Affordable Care Act’s employer mandate keeps on moving.

The Treasury Department today issued a rule relaxing important employer requirements under the ACA, foremost among them to postpone the mandate for businesses with between 50 and 99 employees until 2016.

This is the second major postponement of the ACA’s employer mandate:  Last summer, the Obama Administration delayed implementation for all qualifying businesses from January 2014 to January 2015.

In addition, the administration today reduced the percentage of employees large employers will have cover from 96 percent to 70 percent until 2016.  It also clarified that volunteers will not be counted as full-time employees under the ACA.

We will report more about these changes in the coming weeks.  For now, click here for a rundown of today’s rule from the Washington Post’s Wonkblog.

Compliance: Making sense of the myriad tests for independent contractor v. employment status

Posted in Affordable Care Act, Independent Contractor v. Employee

The question of whether a worker is an employee or an independent contractor can have very important consequences, as the two categories receive very different treatment under the law.

To name only a few differences, there are no federal or state income tax withholding obligations for independent contractors; wage and hour laws do not apply to independent contractors; most anti-discrimination laws do not apply to independent contractors. And, of course, the employer mandate under the Affordable Care Act does not apply in the case of independent contractors. There is a lot riding on the question.

It can sometimes be difficult to predict whether a worker will be deemed an employee or an independent contractor, but there are multiple tests depending upon which area of law is implicated.

For example, where a worker is claiming to be an employee and is seeking remedies under California law (for example, state wage and hour or state discrimination claims), the primary test of employment relationship is whether the principal has the right to control not just the means, but also the manner in which the results are achieved. Added to this are a series of “secondary factors,” such as whether the worker is engaged in a distinct occupation, whether the worker supplies the tools and instrumentalities for the job, the method of payment, whether the worker has a substantial investment in the business, whether the worker hires employees to assist him, whether the parties believe they are creating an employer-employee relationship, and the degree of permanence of the relationship.

Read more at InsideCounsel.

Obama Administration Bends Individual Mandate Rules

Posted in Affordable Care Act

With the deadline to select health coverage just days away, the Obama administration has given an early Christmas present to individuals whose policies were cancelled because of the Affordable Care Act (“ACA”).

Those individuals will be temporarily “exempted” from the ACA’s individual mandate, according to a bulletin issued late Thursday from the Department of Health and Human Services.  The rule change was spearheaded by a group of Democratic senators, many of whom face tough re-elections battles next year.

The ACA includes a hardship exemption for people who have undergone “an unexpected natural or human-caused event.”  The administration’s rule change places having your health plan cancelled under that definition.

This is the second unilateral revision the Obama administration has made to the ACA in response to public outrage over cancelled policies.  Last month the administration allowed insurers to continue offering health plans that fell short of the ACA’s mandates for another year – though individual states were left to decide whether to green light the extension.

The newest change effectively undercuts the individual mandate, a central feature of the ACA, which was schedule to take effect on January 1.  Individuals who qualify for the exemption can now either opt out of coverage, purchase bare bones “catastrophic” coverage, or sign up for a plan under an ACA exchange.

The revision raises numerous thorny questions, including the fairness of exempting individuals simply because their former plans failed qualify under the federal health law.

In addition, fewer young, healthy individuals will be signing up on the exchanges, exacerbating concerns about the fundamental economic viability of the ACA.  As Karen Ignagni, president of America’s Health Insurance Plans, told the Washington Post:

This latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers.

Most employers will not be affected by exemption, as it primarily applies to individual and small group plans.  However, changes in the marketplace now could impact premiums and other aspects of coverage of 2015.

We will keep you posted of significant developments.

California Restaurant Managers Get Second Chance at Class Action

Posted in California Court of Appeal, Case Updates, Class Actions, Exempt Status, Wage & Hour

In Martinez v. Joe’s Crab Shack Holdings, the California Court of Appeal for the Second Appellate District reversed an order denying class certification to a group of managerial restaurant employees allegedly misclassified as exempt.

The case was brought by lower-level managers at Joe’s Crab Shack restaurants throughout California who complained that they performed many of the same tasks as hourly employees but did not qualify for overtime pay due to their managerial status.

In support of their case, Plaintiffs filed declarations from 22 managers who reported routinely working up to 70 hours per week, often filling in where needed as cooks, servers, bussers, hosts, stockers, bartenders, and kitchen staff.  The declarants reported that they received no overtime for working these positions that were normally staffed by hourly employees.

The question at issue was whether the managers met the requirements for class certification.  Under California law, class treatment is appropriate where:

  1. common questions of law or fact predominate;
  2. class representatives have claims or defenses typical of the class; and
  3. the class representatives can adequately represent the class.

The application of these factors is not always simple.

The trial court denied class certification, holding that Plaintiffs failed to establish that their claims were typical of the class and that common questions predominated.  The Second Appellate District reversed.

In so holding, the court criticized the lower court for focusing on the plaintiffs’ varying damages rather than on common issues of liability.  Thus, the court noted that plaintiffs may have satisfied the “typicality” requirement because they all claimed (1) their tasks did not change once they became managers and (2) they were not paid overtime for performing utility functions normally reserved for hourly employees.  The fact that the managers alleged varying degrees of damages should not defeat class certification, the court held.

[T]he fact finder here will ultimately have to decide whether [the employer] properly classified the members of the class as exempt from overtime requirements,” the court stated.

Accordingly, the court remanded the case for a new determination on class certification.

Employee classification can present challenging questions for employers.  Barger & Wolen attorneys are available to answer any questions you may have.

Evidence of Employee Disqualification Is Relevant Regardless of When It Was Learned

Posted in Fair Employment and Housing Act

In Horne v. International Union of Painters and Allied Trades District Counsel, 16, Plaintiff Raymond Horne, an African American male, applied for organizer positions within the union of which he was a member on two occasions.  Defendant union hired white males in each case, and Horne sued the union, alleging that he had not been hired due to racial discrimination, in violation of Government Code section 12940, subd. (a) of the Fair Employment and Housing Act (“FEHA”).

In discovery, it was revealed that Horne had served a prison term years earlier in connection with a conviction for possession of narcotics.  Due to his conviction, he would have been barred, under federal law, from employment as an organizer.  The trial court granted summary judgment in the union’s favor, finding that Horne was unable to establish a prima facie case of discrimination because he did not show that he was qualified for the job for which he applied.

The First Appellate District affirmed.

As the Court explained, California has adopted the three-stage burden-shifting approach for trying discrimination claims. Under this approach, the plaintiff bears the initial burden to prove a prima facie case of discrimination by a preponderance of the evidence. If he does so, then the burden shifts to the defendant to offer any legitimate, non-discriminatory reasons for failing to hire him. The trial court then assesses whether the proffered reasons might be pretextual.

Before getting to the issue of the defendant’s motive, the plaintiff must first establish his prima facie case.  In order to show this, he must show that he was qualified for the position.  Here, the Court ruled, because Horne could not establish that he was qualified for the position, he could not establish a prima facie case.

Horne argued that the “after-acquired evidence doctrine” prohibited the union, and the Court, from considering evidence of disqualification made after the decision not to hire him.  As the Court explained, “the after-acquired evidence doctrine precludes consideration of evidence bearing on the employer’s motive that was unknown to the employer before the decision not to hire was made.”

Here, the Court explained, while such evidence would be inadmissible with respect to the second part of the burden-shifting analysis (i.e., employee motive), it is indeed relevant to the first part of the analysis (i.e., prima facie case):

When the issue before the trial court is not employer motive but applicant qualification, evidence that the applicant was disqualified as a matter of law at the time of the employment decision is relevant, whenever the employer acquired that information.

Please contact the author if you have any questions regarding this matter, or employee discrimination claims.

California Will Not Allow Health Insurers to Reinstate Coverage

Posted in Affordable Care Act

More than a million California residents whose health plans were cancelled under the Affordable Care Act, a.k.a. Obamacare, will not be able to keep their existing coverage, despite President Obama’s directive that insurers keep such plans available for another year.

The decision about whether to implement the president’s administrative “fix” rested with Covered California, the state’s new insurance exchange.  The exchange’s board announced today that it would not allow insurers to revive plans that fell short of the ACA’s coverage mandates.  Instead, California’s exchange will stay the course and continue to enroll residents into Obamacare.

 Covered California made the best decision for consumers by supporting the success of our new health insurance marketplace,” said Patrick Johnston, President and CEO of the California Association of Health Plans.  “Today’s decision comes with a renewed effort to ease the transition process for consumers in the form of a five-step action plan focusing on extending deadlines and increasing enrollment assistance.”

The decision will undoubtedly disappoint California residents who liked their previous coverage and had hoped they could keep their nonconforming plans for another year.  The announcement also drew the consternation of state Insurance Commissioner Dave Jones, who previously expressed support for President Obama’s directive.

 Covered California rejected what President Obama and I asked for – that individual policyholders be allowed to keep their existing health insurance through all of 2014.  Covered California’s decision denies Californians the same opportunity health insurers are giving to its small business customers who are being allowed to renew current policies throughout 2014.”

The board’s decision, however, does not come as a surprise.  Allowing nonconforming policies to continue for another year poses a risk to Obamacare’s financial viability as the move could prevent young, healthy individuals from participating in the new exchanges.  A risk pool disproportionately made up of previously hard-to-insure participants could cause premiums to soar.

We will watch the developments and keep you informed.

Obamacare Chaos: Two Lessons for Employers

Posted in Affordable Care Act, Opinion

Dysfunctional websites. Low enrollment numbers.  Public outrage over cancelled health policies.  Mea cuplas.  A presidential administrative “fix.”  Competing Congressional solutions.  Finger pointing.  It’s enough to make your head spin!

As an employer, you may be wondering what the recent flurry of activity surrounding the Affordable Care Act (a.k.a. Obamacare) means for your business.  This post presents the two most important lessons that employers should keep in mind following last week’s events.

First a brief recap: 

The mid-November headlines have focused on low enrollment numbers and growing discontent among millions of consumers whose health plans have been cancelled because they did not comply with the ACA.

Regarding the enrollment issue, the federal government last week reported that only 106,185 individuals nationwide have “selected” an Obamacare exchange plan.  The term “selected” appears in quotes because the government is counting people who have navigated the exchanges’ problematic websites and placed plans in their shopping carts – not necessarily people who have actually enrolled and paid premiums.

The figure is far lower than the government had projected.  It also likely includes a disproportionate number of individuals who had difficulty purchasing insurance before, i.e. the sick and elderly.  The economic viability of Obamacare depends on young, healthy individuals signing up in droves to balance the risk pool.  It remains to be seen whether enrollment will increase when (and if) the federal government corrects the technical snafus plaguing its exchange websites.

Next is the issue of cancelled policies.  During his campaign for Obamacare, the President repeatedly promised that individuals who liked their existing plans would be able to keep them.  This turned out to be false.  Millions of consumers, including more than a million in California, have had their plans nixed because they did not meet Obamacare’s regulatory mandates.

This has mushroomed into a major problem for Democrats, many of whom are up for re-election next year in swing districts.  President Obama on Thursday attempted to stem the damage by (1) apologizing for his unfounded assurances and (2) unilaterally changing the rules to allow insurers to continue offering their existing plans for another year.

Sounds good – but this “fix” is fraught with complications.  First, insurers have been restructuring their plans to meet the Obamacare mandates since 2010.  As a practical matter, insurers may not be able to stop on a dime and reinstate the cancelled policies.  Second, Obama’s directive did not guarantee continued coverage; it simply gave states the option of whether or not to allow insurers to offer nonconforming coverage.  It remains to be seen whether state insurance commissioners – especially those who are loyal to the president and his signature legislative achievement –  will go along.

In California, Insurance Commissioner Dave Jones said he would follow Obama’s directive.  The final decision, however, rests with a newly formed board of the state’s new insurance exchange, which is scheduled to discuss the issue next week.

Meanwhile, on Friday the U.S. House of Representatives – including 39 Democrats –  approved a measure, H.R. 3350: Keep Your Health Plan Act of 2013, that would allow insurers to continue offering existing non-conforming plans and also enroll new individuals into those plans.  The president has vowed to veto the measure in the unlikely event it passes through the Senate.  Senate Democrats have offered a competing fix that appears to be on the back burner for now.

So how does all this affect you as an employer?  We see two important takeaways.

Takeaway No. 1.  Sit Back and Watch

To a large degree the current maelstrom is not your problem (yet).  Because of the postponement of the employer mandate until January of 2015, employers have the luxury of sitting back and watching events unfold – and you may actually benefit from any cosmetic or structural fixes to the ACA made between now and the implementation date.

The current fray primarily involves plans for individuals and small businesses.  These policy holders, and the individual marketplace in general, have essentially become the guinea pigs for the ACA.  Ideally, the healthcare landscape will become more clear and certain by the time employer mandates under the ACA kick in.

Takeaway No. 2.  Stay Flexible

Plan assiduously for ACA implementation, but keep in mind that the specific requirements may change.

The future of the ACA has never been more uncertain.  The low enrollment numbers coupled with the prospect of too few healthy individuals opting for coverage have shaken the very foundations of the law.  Though Obama Administration officials assert that the ACA has built-in safeguards to prevent a “death spiral,” the prospect of the law sinking under its own weight – or outright repeal – have never seemed so possible.

Obamacare’s rocky rollout also raises questions about the premiums insurers will be able to offer, making planning more difficult for all stakeholders.  Moreover, President Obama has demonstrated a willingness unilaterally to rewrite key provisions of the ACA to suit his immediate political needs.

All this creates uncertainty for employers, which is never good for business.  We recommend that you move forward aggressively with a prudent business plan to satisfy the ACA employer mandate.  You don’t want to risk penalties for being unprepared at the implementation date.  Just don’t carve your plan in stone under current political climate.

Machinations in Washington may necessitate major or minor adjustments to your approach.  It will be important to communicate with counsel in the coming months to better understand your options.

Barger & Wolen attorneys are available to discuss the employer mandate and any other personnel-related concerns you may have.