2015 employment law update what every employer needs to know

EMPLOYMENT LAW UPDATEWhat Every Employer Needs To Know

Today’s Agenda1. Litigation Trends

2. Company Policies

• Employee Handbooks• Dress Code• Discipline• Social Media

3. Wage & Salary (DOL)

• Independent Contractors• Exempt and Non-Exempt• Meal & Rest Periods

4. Discrimination (DOJ)• ADA/FMLA/Workers’ Compensation• Fitness for Duty• Substance Abuse

5. Affordable Care Act• Myth v. Fact• Penalties for Non-Compliance

Today’s Speakers

Scott Leuning JDAttorney

Goosman Law Firm

Offices in Sioux City IA and Sioux Falls SD

Practice focuses on medical malpractice

defense, health law, employment law, and

complex civil litigation. Also experienced

in medical regulatory matters,

commercial litigation, and representing

municipalities and school districts.

Patricia Dougherty RN SPHRManaging Partner

The Weston Group

Practice focuses on HR support services for

small to medium sized businesses. The Weston

Group provides on-site, online and unlimited

phone/email access to businesses across the

US. The Weston Group assesses a company's

practices and develops strategies and solutions

tailored to enhance organizational success.

Federal Employment Law

HIPAANational OriginOSHARace DiscriminationReligious DiscriminationSex DiscriminationSexual HarassmentWARN

ADA- Disability DiscriminationAffirmative ActionAge DiscriminationClass ActionsCOBRAEmployee BenefitsFLSA & Wage & HourFMLAImmigration

61% of businesses expect to see a jump in the

number of litigation matters they will be

handling in 2015

Corporate counsels are embracing early case

assessment as a litigation management tool

Litigation Trends

Texas consistently has the highest number of EEOC claims

Nationally: Settlement dollars have increased by 68% in the last 10 years

Litigation Trends EEOC Statistics

NATIONAL Totals # of Claims Filed

2009 -93,2052010 – 100,2312011 – 111, 2592012 – 99,5072013 – 93,7272014 – 88,778

Retaliation Cases (42% of total)

Employment Discrimination Trends

• 60% increase in ADA cases from 2010-2012• Discharge• Reasonable accommodation• Harassment• Discipline

• Title VII and ADEA remain stable• Discharges• Sexual harassment• Discipline• Intimidation• Hiring Department of Justice Issues

200920102011201220132014

95% Increase since 2009

Historical South Dakota Charges

Top Five Litigation Risks

#1 Misclassification of Independent Contractors**

#2 Wage & Hour Violations**

#3 Gender & Race Discrimination*

#4 Americans with Disabilities Act*

#5 Family & Medical Leave**

* Discrimination cases – DOJ** Department of Labor issues

Goosmann Law Firm’s Guide to Employee Handbooks:

What Every Employer Needs to KnowSCOTT LEUNING

101 South Reid Street, Suite 307Sioux Falls, SD 57103

(605) 371-2000Scott@Goosmannlaw.com

AGENDA

Overview of Employee Handbooks.

Key Elements to Include in Your Handbook

Questions

DO I REALLY NEED A HANDBOOK?

Unless You Have No Employees, the Answer Is YES.◦Your handbook provides a blue print for your vision.◦Your handbook sets forth your expectations for employees.

Your Handbook Helps Reduce the Possibility of Litigation ◦Addressing workplace discrimination◦Addressing leave issues◦Addressing

Having a Handbook Makes Your Life Easier

CONTENTS OF AN EMPLOYEE HANDBOOK

Company Overview and Vision

At-Will Employment Statement

Workplace CommitmentsCompany Policies &

ProceduresEmployment Classification

Attendance PoliciesLeave PoliciesWork PerformanceDiscipline PolicyEmployee Health & SafetyBenefitsAcknowledgement of

Receipt

COMPANY OVERVIEW & VISION

This section should provide your employees with general history and background about your company.

If you have a vision or mission statement place it in this section.

PURPOSE OF THE HANDBOOK Handbook has been prepared to inform new employees of the

policies and procedures of this company.

The handbook is not all-inclusive nor intended to provide strict interpretations of policies.

The handbook offers an overview of work environment.

The handbook is not a contract, either expressed or implied, guaranteeing employment.

Company reserves the right to unilaterally revise, revoke, terminate or change any policies.

This handbook replaces any and all previous handbooks.

AT-WILL EMPLOYMENT

Employment at this company is at-will.

Employment relationship can be terminated at any time, with

or without reason or notice by either the employer or the

employee.

At-will employment relationship exists regardless of any

statements by the office personnel to the contrary.

At-will nature of this employment relationship can only be

modified in writing.

EQUAL OPPORTUNITY EMPLOYMENT

Establish that company is an equal opportunity employer.

No unlawful discrimination against employees or applicants on

basis of race, color, religion, creed, sex, national origin, age,

disability, marital status, veteran status, or any other status

protected by applicable law.

Note that reasonable accommodations will be made for qualified

individuals with disabilities to the extent required by law.

NON-HARASSMENT/NON-DISCRIMINATION POLICY

Include a section that outlines your company’s non-harassment policies.

Include instructions as to how to report harassment and who to report it to.

Follow the policy once it is implemented, including promptly investigating claims made by employee.

COMPANY POLICIES AND PROCEDURES

Professional Conduct.

Dress Code.

Pay Periods.

Company Property.

Social Media.

Privacy.

Personnel Files.

PROFESSIONAL CONDUCT

Include a general statement about employees being

respectful and courteous.

Statement that general cooperation between

coworkers and supervisors is expected.

Individuals who act in an unprofessional manner may

be subject to disciplinary action.

DRESS CODE

If your employees deal extensively with the public you may want a dress code.

Factors to consider:1) Your business’s public image2) Nature of the work performed by employees3) Safety standards4) Employee privacy interests5) Whether the dress code will create morale problems

DRESS CODES AND THE LAW

Your dress code cannot treat some employees less favorably because of their national origin.

If dress code conflicts with an employees’ religious practices and the employee requests an accommodation, employer must modify the dress code or permit an exception unless is causes undue hardship.

Dress codes must be modified to accommodate a disability.

DRESS CODES AND THE LAW

Employers can require employees to remove piercings or

cover body art. (Such policies must be uniform for gender)

Under the law an employee has no legal right to show body

art in the workplace that isn’t considered a religious or

racial expression.

Dress code policies must target all employees

PAY PERIODS

This is the section every employee with read!

Include information as to who to contact if there is a

mistake in pay calculation.

Address whether advances will be permitted.

Address issue of lost or misplaced checks.

COMPANY PROPERTY

Specify how company equipment will be treated.

In your policy “business use only?”

Company vehicles—off-duty use, other drivers, etc.

Computers/Phones: internet use, downloading software, etc.

Remind employees that they should have no expectation of

privacy in their use of company computers or other

electronic equipment.

SOCIAL MEDIA

You cannot ignore social media.

If you don’t have a social media policy, you need one in your handbook.

SOCIAL MEDIA DEMOGRAPHICS

72% of all internet users are active on social media

71% of users access social media with mobile device

18-29 year olds have 89% usage

23% of Facebook users login at least 5 times per day

SOCIAL MEDIA POLICIES

The reality is that your employees probably access social media during work hours.

If not, they are probably talking about your business at times on social media.

How do you address this issue?

SOCIAL MEDIA/NLRB RULINGS

You cannot broadly ban employees from exercising their right to communicate with each other with the aim of improving wages, benefits, working conditions.

You can prohibit vulgar, obscene, threatening or harassing activity.

You can also prohibit employees from disclosing confidential and/or proprietary information.

CONTENTS OF A SOCIAL MEDIA POLICY

R * E * S * P * E * C * T

ResponsibilityEtiquetteSelectivityPrivacyEfficiencyConfidentialityTransparency

RESPONSIBILITY

Employees must be responsible about:

1) The content they post

2) The audience their posts reach

3) The potential effects of an improper post

ETIQUETTE

Not all social media posts are absolutely protected by law.

An employee who uses social media to harass, intimidate or bully other employees violates the employer’s legal requirement to maintain a workplace free of harassment and discrimination.

Your social media policy must convey that such behavior will not be tolerated.

SELECTIVITY

Employee posts about company products should be posted with caution.

Decisions about when to respond, and what to say, about criticisms made against your company, need to be made at the corporate level and that should be spelled out in your social media policy.

PRIVACY

Your social media policy should prohibit employees from disclosing private matters such as: Medical issuesLeaves of absenceIdentifying information about employees,

including Social Security Numbers, and dates of birth.

EFFICIENCY

Employees may occasionally use social media at

work, but it must not affect workplace expectations

regarding employee performance.

CONFIDENTIALITY

Company confidentiality applies to social media.

Confidential nonpublic information, business plans,

pricing models, attorney-client privileged documents,

etc. should not be disclosed on social media.

TRANSPARENCY

Employer posts on social media must be transparent and honest.

Positive comments about business products/services must be accurate.

You cannot pay people for positive posts (Samsung)

PRIVACYBe explicit as to the level of privacy expected in

workplace.

Specify that company retains access to all company property, including computers, desks, file cabinets, storage facilities.

Employees should know they should not expect privacy when on company grounds or when using company property.

PERSONNEL FILESNo statutory provision in South Dakota.

You may want to establish a policy allowing employees access to their personnel file upon request.

You should have a policy that employees must promptly notify company of any changes of address, marital status, number of dependents, emergency contact, etc.

EMPLOYMENT CLASSIFICATION

Exempt employees.

Non-exempt employees

Part-time vs. Full-time employees.

ATTENDANCE POLICIES

General statement regarding hours of operation.

Tardiness and Breaks

Leave policies:◦ Vacation.◦ Sick Leave◦ Family Medical Leave Act/Leave of Absence

Holidays

Jury Time

Military Leave

Work Performance

Expectations

Reviews

Insubordination

DISCIPLINE POLICY

General Statement:

The company reserves the right to discipline and/or terminate any employee who violates company policies or rules of conduct. Poor performance and misconduct are also grounds for discipline or termination.

DISCIPLINE POLICY (cont.)

List of actions considered unacceptable and considered grounds for discipline….

If you include a list, ALWAYS include saving language:

“This list is not comprehensive; rather, it is meant merely as an example of the types of conduct that this company does not tolerate. These actions include, but are not limited to:

DISCIPLINE POLICY (cont.)

Progressive Discipline Language:

Be careful about setting up progressive stages of discipline, this could be interpreted as being binding because you are guaranteeing certain steps to be taken for discipline.

Progressive discipline may defeat your at-will employment status.

TERMINATION

Reiterate that employment is on an at-will basis.

Set out what happens upon termination:◦Continue to work until last scheduled day of

employment;◦Turn in all reports and paperwork required by employer;◦Return all files, company property and equipment;◦Turn in all passwords to supervisors;◦Participate in an exit interview.

EMPLOYEE HEALTH AND SAFETY

◦2013: 4,405 workplace fatalities (12 per day on average)

◦2013: 2.9 million accident-related injuries at work

EMPLOYEE HEALTH AND SAFETY

Accident Prevention

Training on any Equipment

Maintaining a Safe Work Area

Protective Equipment

Procedure for Reporting Unsafe Conditions

EMPLOYEE SECURITY

1) Workplace homicide is leading cause of death

among female workers in U.S.

2) 2011: 780 workplace fatalities due to violence

(homicides and suicides)

3) Shootings account for 78% of workplace homicides

4) Disgruntled employees/Domestic Violence

EMPLOYEE SECURITY POLICIES

1) Security badge system

2) No unescorted guests

3) When employees are terminated or laid off be

sure to get their badge

4) Surveillance cameras

5) Adequate lighting if you have night shift

EMPLOYEE BENEFITS

Health Insurance

Retirement Plan

Workers’ Compensation

Disability Coverage

EMPLOYEE BENEFITS

Sample Disclaimer Language:

This handbook contains descriptions of some of our current employee benefits. Many of the company’s benefit plans are described in more formal plan documents available from [insert name/title]. In the event of any inconsistencies between this handbook or any other oral or written description of benefits and a formal plan document, the formal plan document will govern.

TERMINATION

Situations may arise where an employee decides to quit.

Request that employee provide two weeks notice.

This notice does not alter at-will employment.

Terminating employees are required to turn in all company

property.

Failure to turn in company property may result in

withholding final paycheck.

TERMINATION

Include information regarding final paycheck.

COBRA benefits

Exit interview

◦Complete necessary forms

◦Collect company property

◦Discuss employment experiences with company

ACKNOWLEDGEMENT OF RECEIPT

Be sure to have employee sign and date, as well

as the employee’s supervisor or other

authorized person.

Questions?

Short Break

Top Five Risks

#1 Misclassification of Workers as INDEPENDENT CONTRACTORS

• Civil penalties against an employer of up to $1,000 per misclassified employee for a first violation and up to $2,500 per misclassified employee for each subsequent violation

• Misclassification of employees as independent contractors can result in substantial liability and penalties for, among other things, back taxes, overtime pay, workers compensation, employee health benefits, and retirement benefits

#2 WAGE & HOUR VIOLATIONS

•The Fair Labor Standards Act (FLSA) sets minimum wage and overtime pay standards for employment.

•The Act also gives the U.S. Department of Labor's (DOL) Wage Hour Division (WHD) the authority to investigate and gather data regarding the wages and hours of employment for entities subject to the requirements of the Act.

• Employers that violate minimum wage or overtime pay provisions may have to pay back wages and penalties.

•Recent settlements:• AT&T = $1 Billion • Walmart = $40 Million (in Massachusetts alone!)

Top Five Risks

#2 WAGE & HOUR VIOLATIONS

• Just over 40% had deductions illegally taken from their paycheck (for breakage or to pay for tools or other items required for work, for example)

• Exempt vs. Non-Exempt – HUGE

• The DOL has added 250 new investigators and damages/ attorney’s fees will be doubled for “willingly and knowing” violations

Top Five Risks

Nonexempt and Exempt

Nonexempt employees -Hourly

Exempt employees -$455/week -Cannot be subject to reduction because of

variations in the quality or quantity of work

-Docking issues

WHO DETERMINES CLASSIFICATION?

What Hours Count?Employees must be paid for

work “suffered or permitted” by the employer even if the employer does not specifically authorize the work.

If the employer “knows or has reason to believe” that work is occurring, the employee must be paid for the hours—even if off-site or off-shift.

MANAGE THE ISSUE

Rest Periods

◦ Meals Required under FLSA? 30 minutes UNINTERRUPTED Automatic deductions

◦ Work breaks 5-20 minutes Not a guarantee

◦ Sleep time

#3 GENDER & RACE DISCRIMINATION

Sexual Harassment in the Workplace: It's Not Always What You Think

Male – Female

Female – MaleFrom 1990 to 2009, the percentage of sexual

harassment claims filed by men has doubled from 8 percent to 16 percent of all claims, according to the Equal Employment Opportunity Commission.

Same sex harassmentMost often settlements EEOC states these are also on the rise

Top Five Risks

The perpetrator does not have to be part of the same company as the victim.

Any party acting as an agent of the employer such as a real estate agent or consultant can be a perpetrator in a harassment claim.

In addition, a harasser could be a delivery person from another company. The company who sent the delivery person could be

held accountable for the harassment.

Top Five Risks

The victim does not have to suffer economic or job related injury to file a harassment claim.

Hostile work environment harassment is harassment that typically must be intentional, severe, recurring and pervasive, and interfere with an employee's ability to perform his or her job

Work Place Romance…..

Top Five Risks

WORKPLACE ROMANCE

In a survey by CareerBuilder.com in 2009, 40% of respondents revealed that they have dated a coworker

When can consensual sex create a hostile workplace environment?

Sexual favoritism California Supreme Court held that "when

such sexual favoritism in a workplace is sufficiently widespread it may create an actionable hostile work environment”

Top Five Risks

#4 Americans with Disabilities Act

• The ADAAA, which took effect in January 2009, makes it significantly easier for a plaintiff to establish that he or she is disabled under the ADA

• While the ADAAA retains the ADA’s definition of “disability” as a substantial limitation of a major life activity, it stipulates that its meaning “shall be construed in favor of broad coverage of individuals

Top Five Risks

#4 Almost everyone is covered by ADAAA

• More people with disabilities filed charges of discrimination against their employers last year than at any other time in the 20-year history of the Americans with Disabilities Act

• USA Today: The number of ADA charges filed in 2009 hit an all time high with almost 21,500 ADA related charges being filed with the EEOC

Top Five Risks

Defining Disability◦Physical or mental

impairment that substantially limits a major life activity

◦Record of impairment

◦Regarded as having an impairment

Defining Disability (cont.)

Covered:◦AIDS or HIV virus◦Epilepsy◦Learning disability◦Limited or no use of limbs◦Mental retardation◦Paralysis◦Hearing, vision, or speech impairment

Defining Disability (cont.)

Not covered:

◦Impairments of short duration

◦Temporary impairments

◦Illegal drug use

ADA and Addictions

◦Alcoholism covered (not while on duty!)

◦Current use of illegal drugs not covered

◦Other addictions not covered Gambling Sex Addict Etc.

Basic Statutory Obligations

◦We may not discriminate based on disabilities

◦We must make reasonable accommodations

◦We may hire the best qualified applicant

Reasonable Accommodation

◦Changes that allow a qualified individual

to do the job

◦Reassignment to light duty

Medical Information

◦All medical information must be kept strictly confidential

Job Interviews

Don’t ask about the:◦Existence of a

disability

◦Nature of a disability

◦Severity of a disability

Job Interviews (cont.)

Only ask about reasonable accommodation when:

◦Describing the hiring process

◦Disability is obvious or disclosed

◦Describing or demonstrating how the job is performed

After the Job Offer

◦Post-offer inquiries about accommodation are allowed

◦Pre-employment physicals may be allowed

◦Medical exams may be requested

Medical Certification & Exams◦Reasonable medical

records may be requested—not all medical records

◦Medical exams may be requested when documentation is insufficient

Direct Threat

◦Employee with disability poses a significant risk of substantial harm in the workplace

◦We are not required to accommodate

◦We must determine direct threat

#5 FAMILY & MEDICAL LEAVE

• According to WorldAtWork.org, claims related to FMLA have increased by more than 10 percent this year

• More people in the United States are becoming aware of their rights under FMLA or perhaps less companies want to provide family medical leave protection to workers in such tough economic times.

Top Five Risks

The top reasons for FMLA leave:

• Personal illness or injury

• Care for a child

• Care for an elderly relative.

• Time off for pregnancy

• Time off for the adoption of a child or birth of a child

• Care for a recently injured military member

Top Five Risks

Most important to remember:

• Determine if employee is eligible• Make employee aware of eligibility• Start the paperwork process• Be sure you get completed paperwork• Access resources if you don’t understand the condition• Track utilization if intermittent• Get re-certification if needed• Track exhaustion of leave• BE CONSISTENT!

Top Five Risks

For the Birth or Placement of a Child

Both the mother and father are entitled to FMLA leave for the birth or placement of the child and/or to be with the healthy child after the birth or placement (bonding time)

Employees may take FMLA leave before the actual birth, placement or adoption

Leave must be completed by the end of the 12-month period beginning on the date of the birth or placement

Serious Health Condition

Illness, injury, impairment or physical or mental condition involving:

• Inpatient Care, or

• Continuing Treatment by a Health Care Provider

• Does not need to be an MD

• An overnight stay in a hospital, hospice, or residential medical facility

• Includes any related incapacity or subsequent treatment

Amount of Leave

•Employee’s workweek is basis for entitlement

•Eligible employees may take up to 12 workweeks* of FMLA leave:

– for the birth or placement of a child for adoption or foster care;

– to care for a spouse, son, daughter, or parent with a serious health condition; and

– for the employee’s own serious health condition.

Intermittent Leave• Employee is entitled to take intermittent or reduced

schedule leave for:– Employee’s or qualifying family member’s serious health

condition when the leave is medically necessary

–Covered service member’s serious injury or illness when the leave is medically necessary

–A qualifying exigency arising out of a military member’s covered active duty status

• Leave to bond with a child after the birth or placement must be taken as a continuous block of leave unless the employer agrees to allow intermittent or reduced schedule leave

12-Month Period

Method determined by employer

• Calendar year

• Any fixed 12-month leave year

• A 12-month period measured forward

• A rolling 12-month period measured backward

Employer Responsibilities

Provide notice

Maintain group health insurance

Restore the employee to same or equivalent job and benefits

Maintain records

Job Restoration

• Same or equivalent job–equivalent pay

–equivalent benefits

–equivalent terms and conditions

• Employee has no greater right to reinstatement than had the employee continued to work

• Bonuses predicated on specified goal may be denied if goal not met

Prohibited Employer Actions

Employers cannot:

• interfere with, restrain or deny employees’ FMLA rights

• discriminate or retaliate against an employee for having exercised FMLA rights

• discharge or in any other way discriminate against an employee because of involvement in any proceeding related to FMLA

• use the taking of FMLA leave as a negative factor in employment actions

Fitness for Duty• For an employee’s own serious health condition,

employers may require certification that the employee is able to resume work– Employer must have a uniformly-applied policy or practice of

requiring fitness-for-duty certification for all similarly-situated employees

• If state or local law or collective bargaining agreement is in place, it governs the return to work

• Not permitted for intermittent or reduced schedule leave unless reasonable safety concerns exist

• Authentication and clarification

• Employee responsible for any cost

Exhaustion of Leave

If the employee is not able to return to work at expiration of available leave you may need to determine if additional leave may be an accommodation under the ADA.

Not all serious medical conditions are disabilities.

Put the employee on written notice that leave is exhausted, and if they need an accommodation, including additional leave, inform the employee what steps will need to be taken. ◦ Initiate the interactive process.

Americans With Disabilities ActFamily & Medical Leave Act

Workers’ Compensation

“THE TORNADO”

ADA / FMLA / WC

ADA – 15+ Employees Department of Justice

FMLA – 50+ employees Department of Labor

WC – 1+ Employee Department of Labor

Easy Steps to Remember

Work related?

How many employees do you have?

How long has employee been here?

Chronic or just serious?◦ Validate the diagnosis

If ADA, FMLA and WC,GET HELP!!!

Common Mistakes Employers Make

Reactive rather than proactive

“Training does not produce revenue”

Improper termination◦ Be sure to have a consistent corrective action policy

Assuming there is no strong basis for immediate termination, giving at least one warning is important to demonstrate fair treatment

Jurors LIKE employees

Common Mistakes Employers Make

Lack of quality documentation

Favoritism

False comfort◦ Employment-at-will

Do the right thing!

Substance Abuse in the Workplace

Substance abuse in the workplace results in:

◦Absenteeism

◦Diminished productivity

◦On-the-job injuries

◦Potential company liability.

The annual cost of alcoholism and drug addiction

to U.S. businesses is approximately $120 billion,

which is more than the productivity loss due to

heart disease, diabetes and stroke combined!

Twelve percent of full-time employees acknowledged either

having used an illicit drug or having had five or more drinks

at a time five or more times, or both, in the previous

month.(1)

1 .Source: Substance Abuse and Mental Health Services Administration. The NHSDA Report. National Household Survey on Drug Abuse.

Warning Signs of Substance Abuse

Typical warning signs of substance

abuse at work include:

Personal Appearancedisheveled appearanceunsteady gaitslurred speechbloodshot or glazed eyesodor of alcohol on breath.

abuse at work include:

Dependability

Monday/Friday absence pattern

increased tardiness or failure to call in

frequent absences from work area

missed deadlines

Typical warning signs of substance abuse at work

include:

Declining Quality of Work• Increased errors

• work frequently needs to be redone

• inability to understand

• follow through on complex assignments,

• inability to carry out instructions

• low productivity.

Typical warning signs of substance abuse at

work include:Declining Attitude

• uncooperative; increased conflicts with co-workers and customers

• appears nervous

• Distracted

• quick to anger

• exhibits signs of paranoia such as blaming others.

abuse at work include:Judgment

Illogical reasons for decisions

violates policies and procedures

takes inappropriate risk

inattentive to safety procedures.

NO ONE SIGN SHOULD BE TAKEN AS AN

INDICATION OF SUBSTANCE ABUSE.

Some or all signs could be indicative of a problem

and could constitute grounds for testing based

upon reasonable suspicion.

A supervisor needs to discuss his/her

observations with HR before approaching or

Supervisor Responsibility

Knowing AND communicating our policy

Tracking employee work performance

Documenting and discussing changes with employees

Discussing any suspicions of substance abuse with HR

Assisting with disciplinary action

Following up with a referral to the Employee Assistance

Drug & Alcohol Policy

Review & discuss draft policy

Goosmann Law Firm’s Guide to the Affordable Care Act:

How Does It Affect Small BusinessesSCOTT LEUNING

101 South Reid Street, Suite 307Sioux Falls, SD 57103

(605) 371-2000Scott@Goosmannlaw.com

QUESTIONS?

SHORT BREAK

AGENDA

Overview of Affordable Care Act.

Key Elements that Affect Small Businesses

◦ Businesses with less than 25 employees

◦ Businesses with less than 50 employees

◦ Businesses with more than 50 employees

Questions

OVERVIEW OF ACA

It’s been a law for five years.

It’s faced legal challenges

It’s faced political challenges

It’s still here…

AFFORDABLE CARE ACT:

MYTH v. FACT

Affordable Care Act: Myth v. Fact

Myth: All employers are required to buy

health insurance for employees under the ACA.

Affordable Care Act: Myth v. FactMyth: All employers are required to buy health

insurance for employees under the ACA.

Fact: The ACA does not require businesses to provide health insurance for their employees.◦ 2015 businesses with 100 or more full-time employees or full-time

equivalent (FTE) employees that do not provide coverage to their full-time employees may be subject to an Employer Shared Responsibility payment.

◦ In 2016 that threshold drops to companies with 50 or more full-time employees or FTE employees.

◦ 96 percent of companies in United States have less than 50 employees and therefore are not subject to the rules of the ACA.

Myth: Since my state hasn’t set up its own health

exchange, the health care law doesn’t apply to me.

Affordable Care Act: Myth v. FactMyth: Since my state hasn’t set up its own health

exchange, the health care law doesn’t apply to me.

Fact: Every state has a health insurance marketplace.◦ The marketplace may be run by the state or federal

government, or a partnership of both.◦ Insurance plans in the Marketplace are offered by private

companies and all plans will cover the same core set of benefits, called Essential Health Benefits.

◦ No plan can turn you or your employees away because of a medical condition.

Myth: The Affordable Care Act is causing health

insurance rates to rise.

Affordable Care Act: Myth v. FactMyth: The Affordable Care Act is causing health

insurance rates to rise.

Fact: ACA contains a number of provisions to slow health care costs.◦Insurance companies must publicly disclose & justify

premium rate hikes of 10% or more.◦Insurers must spend 80% of premium costs on medical

care. (must refund the difference if they don’t).◦Since ACA passed premiums have grown at less than 5%

annually. In 2014 that rate was 1.7%.

HEALTH INSURANCE PREMIUMS UNDER AFFORDABLE CARE ACT

Before the Affordable Care Act (ACA), small businesses paid on average 18% more in premiums than their larger competitors for the same benefits. The ACA helps small employers by lowering premium cost growth and increasing access to quality, affordable health insurance.

REDUCTION OF PREMIUM GROWTH RATE

Before ACA:

Fewer choices Higher premiums and

unpredictable rate increases Higher rates for groups with

women, older workers & those with chronic health concerns

Waiting periods or no coverage for pre-existing conditions.

Under ACA ins. companies:

Must spend 80% of premiums on actual medical care

Must disclose and justify rate hikes of 10% or more

Can’t charge higher rates or deny coverage because of pre-existing conditions

Can’t charge higher rates for women or older employees

Must pool risks across small groups No annual limits on coverage Must provide core package of

“essential health benefits”

ACA MAKING A DIFFERENCE

6.6 million young adults have coverage through parents’ plans.

17 million children cannot be denied coverage due to pre-

existing conditions.

15 million Americans cannot be dropped by their insurance

companies.

6.1 million seniors saved over $5.7 billion in prescription drugs.

Use of electronic records has increased.

HOW WILL ACA IMPACT

SMALL EMPLOYERS?

HOW WILL ACA IMPACT SMALL EMPLOYERS?

It depends on size of employer.

How many employees does the employer have?

Number of Full-Time

Equivalent (FTE)

employees

Up to 50

24 or fewer

50 and above

CALCULATING NUMBER OF FTEs IN YOUR BUSINESS

Use the most recent year.

Exclude seasonal employees (those who

work less than 120 days a year).

Count the number of people who worked an

average of 30 or more hours per week.

Add to this amount the number of hours

worked per week by non-full time employees

and divide by 30.

CALCULATING NUMBER OF FTEs IN YOUR BUSINESS

Mike owns a business with 20 employees. He has:

15 employees working average of 40 hours/week2 employees working average of 15 hours/week1 employee working average of 25 hours/week2 employees working average of 27 hours/week

Full time employees = 15Non full-time hours (15+15+25+27+27) 30 = 3.6 (always round down for FTEs) 3Mike has 18 FTEs

24 OR FEWER EMPLOYEES:

SMALL BUSINESS HEALTH CARE TAX CREDIT

EMPLOYERS WITH 24 OR FEWER FTE EMPLOYEES

May qualify for tax credit to offset costs:

• Average annual wages below $50,000, and

• Contribute uniform 50% or more toward employees’ self-only premium costs

Maximum tax credit employers with 10 or fewer FTE and average annual wages less than $25,000.

Number of Full-Time

Equivalent (FTE)

employees

Up to 50

24 or fewer

50 and above

2010-2013 up to 35% of small employer’s premium

contribution.

2014 and beyond, credit increased to 50% (35% for

tax exempt employers).

◦ To take advantage of the credit, employees must enroll in

coverage offered by employer through one of the SHOP

certified plans.

◦ Credit can be claimed for any 2 consecutive taxable years

beginning in 2014 (or beginning in a later year).

Employer has 24 or fewer

FTE employees

Employer pays uniform amount of at least 50% of premium for

employee

Employees; average

annual wages are less than

$50,000

Up to *50% Federal Tax Credit in 2014 if for-profit entity

*SHOP participants only

UP TO 50 EMPLOYEES:

The Federally-Facilitated

SHOP Marketplace

EMPLOYERS WITH UP TO 50 FTE EMPLOYEES

• If employer chooses to offer coverage, you may do it through Small Business Health Options Program (SHOP)

• Enhanced SB Health Care Tax Credits available for employers with 24 or fewer employees participating in SHOP

Number of Full-Time

Equivalent (FTE)

employees

Up to 50

24 or fewer

50 and above

What is the Federally-Facilitated SHOP Marketplace?

The Small Business Health Options Program Health Insurance Marketplace created by the ACA Offers small employers a choice of qualified health and dental

plans and tools for making informed choices. Gives eligible small employers access to Small Business Health

Care Tax Credit—worth up to 50% of employer’s premium contributions.

Works with new insurance reforms to create competition on price and quality.

Offers online purchase and enrollment.

Note: Employers with fewer than 50 full-time equivalent employees, aren’t required to offer health insurance, and there’s no penalty if they choose not to.

Who Can Purchase SHOP Coverage?

(1) Must have 50 or fewer full-time equivalent (FTE) employees.

With at least one employee who is not a co-owner or spouse;

Including tax-exempt and religious employers;Offer health insurance coverage to all full-time

employees

(2) Must Offer health insurance coverage to all full-time employees.

Generally these are employees working 30 hours or more per week.

Do not need to offer coverage to your part-time employees (those working 29 hours or less per week).

(3) At least 70% of your full-time employees must enroll in the SHOP Plan. (75% in South Dakota and Iowa)

Employees with coverage through another employer plan, Medicare, Medicaid, the military, or veteran’s programs are not included in calculation.

EXAMPLE OF 75% PARTICIPATION CALCULATION

You offer coverage to 16 full-time employees.2 have coverage through a spouse’s employer1 is covered by Medicare1 is covered by Tricare16 employees total, minus 4 who aren’t included = 12 employees who count toward the 75% requirement.

75% of 12 employees = 9

At least 9 of your employees must enroll to qualify for SHOP plan.

EXCEPTION TO 75% PARTICIPATION REQUIREMENT

If you can’t meet the minimum participation rate you can apply for coverage from November 15 through December 15 every year. This is designed to let employers that don’t meet the participation rate offer a SHOP plan.

BROWSE BEFORE BUYING

Online tool shows price estimates for Federally-facilitated SHOP

Qualified Health Plans and Qualified Dental Plans.

Price estimates are based on the age-ranges of employees and location

of business.

Agents, brokers or Navigators can help employers use this tool.

Employers can get final quotes for 2015 coverage as part of online

enrollment process on HealthCare.gov

New Features of FF-SHOP in 2015

Small employers can access SHOP online (HealthCare.gov)◦ Browse, select and offer employees health and dental coverage◦ Have employees enroll in SHOP coverage online◦ Find and authorize a SHOP broker to help with online enrollment

No paper application will be accepted

SHOP-registered agents and brokers can access online features and manage accounts when authorized by clients

50 OR MORE EMPLOYEES:

Employer Shared Responsibility for Employee Health Insurance Coverage

EMPLOYERS WITH 50 OR MORE FTE EMPLOYEES

• In 2015 there are various types of transitional relief available for employers with 50-99 full-time/full-time equivalent employees.

Number of Full-Time

Equivalent (FTE)

employees

Up to 50

24 or fewer

50 and above

MOST SMALL FIRMS ARE EXEMPT

ACA exempts all employers that have fewer than 50 full-time employees (including FTEs) from employer shared responsibility provisions.

That exempts about 5.8 million out of 6 million firms.

Those 5.8 million firms employ nearly 34 million workers

2015 PHASE-IN PERIOD

The employer responsibility provision will apply to firms with 100 or more full-time employees starting in 2015.

This provision will expand to employers with 50 or more full-time employees starting in 2016.

TWO SCENARIOS FOR POTENTIAL PAYMENT

EITHER(1) An employer does not offer coverage to at least 95%*

of its full-time employees (and dependents) OR(2) The coverage offered to employer’s full-time

employees is not “affordable” or does not provide “minimum value” or particular full-time employee was not offered coverage. AND

At least one full-time employee receives a premium tax credit in the individual Marketplace.* For 2015, replace 95% with 70%

Coverage Provides Minimum Value

Coverage Is Affordable

• Plan must cover, on average, at least 60% of the plan’s total cost of incurred benefit.

• HHS and IRS have an online calculator employers can use to input their plan details and determine if it meets the 60% value threshold.

Coverage is unaffordable if the full-time employee’s share of the lowest cost self-only coverage that provides minimum value costs more than 9.5% of employee’s annual household income.Affordability safe harbor: If the cost to the employee of a self-only plan is not more than 9.5% of employee’s wages as reported on Box 1 of the W-2, it’s deemed affordable for purposes of Employer Shared Responsibility.

Penalty if Coverage Not Offered to Enough Employees

Payment applies if any full-time employee receives a premium tax credit for coverage purchased in the individual Marketplace.

Payment owed: $2,000/year times number of full-time in excess of 30 (in excess of 80 for 2015).

Payment is calculated separately for each month for which coverage not offered ($166.67/month).

Payment is based on employer’s number of full-time employees for that month.

Penalty if Coverage Is Not Affordable or Doesn’t Meet Minimum Value

Payment owed: $3,000/year per full-time employee who receives a premium tax credit for coverage purchased in the individual Marketplace.

Payment is calculated on monthly basis ($250 per month).

Key Points Regarding Penalties Penalties depend on whether employer offers coverage and the

quality of that coverage, rather than whether an employee accepts the offer of coverage.

No payment is owed for part-time employees even if they receive a premium tax credit.

Only receipt of the premium tax credit in the individual Marketplace triggers these payments. If employee obtains coverage from another source no penalty.

Employers that offer coverage to full-time employees must also offer coverage to dependents of those full-time employees under age 26 (coverage of spouse not required).

How to Avoid Penalty Payments

To avoid a payment for failing to offer health

coverage, employers need to offer coverage to 70

percent of their full-time employees in 2015 and

95 percent in 2016 and beyond.

Incentives for Continuing to Offer Health Insurance Coverage

The cost of providing health insurance coverage is tax deductible by the employer. Employer shared responsibility payments are not tax deductible.

Employers offering health insurance coverage can tailor that coverage to provide the benefits most valued by your employers and maintain a competitive advantage in recruiting and retaining employees.

Questions?

SCOTT LEUNING

101 South Reid Street, Suite 307

Sioux Falls, SD 57103

(605) 371-2000

Scott@Goosmannlaw.com

The Weston Group101 South Reid Street

Suite 307Sioux Falls, South Dakota 57104

Office (605) 275-4747

HR@TheWestonGroup.com

www.TheWestonGroup.com

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