The US Department of Labor has finalized a new regulation that will enable more small businesses and self-employed Americans to buy health insurance through association health plans (AHPs), which proponents say will help lower health insurance costs for smaller employers, but which critics say undercuts the essential coverage requirements created by the Affordable Care Act. The core impact of the nearly 200-page rule is to broaden the definition of the term “employer” under the Employee Retirement Income Security Act (ERISA), establishing new criteria under which employers can join together in an association that would still be regarded as a single “employer” for ERISA purposes. SHRM’s Stephen Miller discusses what that means for how small businesses buy group health insurance:
The broader interpretation of ERISA will let employers anywhere in the country that can pass a “commonality of interest” test join together to offer health care coverage to their employees. An association could show a commonality of interest among its members on the basis of geography or industry, if the members are either:
- In the same trade, industry or profession throughout the United States.
- In the same principal place of business within the same state or a common metropolitan area, even if the metro area extends across state lines.
Sole proprietors will be able to join small business health plans to provide coverage for themselves as well as their spouses and children.
Previously existing AHPs, which were allowed under a more limited set of restrictions, will not be affected, unless they choose to expand in ways allowed by the new rule. The rule change, which President Donald Trump ordered the department to study last year, effectively exempts AHPs from ACA regulations that apply only to individual and small group plans by allowing them to operate in the more lightly regulated large group market. These regulations include the core package of health care services known as essential health benefits, which all plans in the individual and small group market are required to include but larger plans are not.
US Labor Secretary Alexander Acosta (Shawn T Moore/Department of Labor/Flickr
Last month, Bloomberg BNA’s Ben Penn and Porter Wells reported that the US Department of Labor was planning to relax a policy put in place by the Obama administration to vigorously enforce regulations prohibiting gender pay discrimination by organizations that contract with the federal government. The department was said to be issuing new guidance to supplant a 2013 directive that had given the Office of Federal Contract Compliance a mandate to audit federal contractors for salary bias and make its own determinations as to whether workers were employed in identical or comparable roles for that purpose.
The OFCCP had used that directive to force substantial settlements from several large employers over alleged pay discrimination, and it has been at the center of the ongoing dispute between the Labor Department and Google over pay discrepancies the office has said indicate widespread discrimination (Google vigorously denies this and claims to have no statistically significant gender pay gap at all).
The new guidance, Penn and Wells explained, would “allow businesses to shape the random Labor Department audits by determining which workers investigators should be comparing for possible pay bias” instead. This change would be in keeping with Labor Secretary Alexander Acosta’s approach of assuming good faith on the part of businesses and allowing them to admit and correct compliance issues without fault rather than pursuing investigations and lawsuits. After these plans came to light, however, the department may be backtracking, Allen Smith reports at SHRM. Mickey Silberman, an attorney with Fortney & Scott in Denver, tells Smith that the OFCCP, Labor Department, and various stakeholders are now discussing the proposed changes.
In its latest regulatory agenda, the US Department of Labor announced its intent to issue a Notice of Proposed Rulemaking for a new overtime salary threshold sometime next January. The Trump administration had first signaled its interest in rewriting the overtime rule last July, when the Justice Department expressed that intent in a court filing and the Labor Department issued a request for comments from the public—the first step in the federal government’s rulemaking process.
A new overtime rule issued by the Obama administration in 2016 raised the salary threshold at which employees are exempt from overtime pay from $23,660 to $47,476, but was blocked from going into effect by the courts and ultimately overturned by a federal judge in Texas last September, who found that the department had erred in setting the new rules for overtime eligibility based on salaries alone and not job descriptions.
The Labor Department appealed that judgment, not because it intends to maintain the previous administration’s rule, but rather out of concern that the ruling would hinder its ability to rewrite it. Current Labor Secretary Alexander Acosta had been critical of his predecessor’s decision to raise the threshold dramatically, indicating in his confirmation hearing last year that he thought an increase was needed but that doubling it all at once would put undue stress on the economy.
Employers may have hoped for a slightly speedier regulatory process, SHRM’s Lisa Nagele-Piazza reports, but now can likely expect a final new rule within two years, giving them plenty of time to prepare for what will probably be a less onerous new standard than the Obama administration’s:
Should US employers still be rejecting candidates or firing employees for using marijuana? Maybe not, US Secretary of Labor Alexander Acosta suggested in comments to Congress this week, according to Politico’s Morning Shift:
Acosta said Tuesday that employers should rethink the practice of drug testing every job applicant, which he suggested could keep qualified people out of the workforce. Acosta’s remarks came in response to a question from Rep. Earl Blumenauer (D-Ore.) during a House Ways and Means Committee hearing. Blumenauer, who’s from a state that legalized recreational marijuana, said he’s concerned that legal pot shows up “in ways that are disqualifying” on drug tests, and asked Acosta what could be done to “unleash” those workers’ potential.
“There are sometimes valid health and safety reasons why an individual that cannot pass a drug test shouldn’t hold a certain job,” Acosta said. However, he also said some employers “make the assumption that because there’s a negative result on a test they would not be a good employee.”
Acosta was testifying in a hearing on Jobs and Opportunity: Federal Perspectives on the Jobs Gap, part of a series of hearings the committee is holding as it prepares to reauthorize the Temporary Assistance for Needy Families (TANF) program. While the secretary did not say in so many words that employers should stop drug testing their employees, he expressed the opinion that “it’s important to take a step back … and ask, are we aligning our drug policies and our drug testing policies with what’s right for the workforce?”
Blumenauer’s question to Acosta and the secretary’s less-than-categorical answer both reflect the significant degree to which employers are being forced to rethink their drug policies in light of changing attitudes toward cannabis and the growing number of jurisdictions where it has been decriminalized or legalized for either medicinal or recreational uses. Businesses have begun lobbying the Trump administration to issue guidelines on how to navigate the conflict between federal drug laws—under which marijuana is still classified as a Schedule I substance along with heroin, ecstasy, and LSD—and increasingly liberal state laws.
Last month, the US Department of Labor’s Wage and Hour division announced that it was preparing a six-month pilot of the Payroll Audit Independent Determination (PAID) program, to launch this month, which will allow employers to self-report potential overtime and minimum wage violations under the Fair Labor Standards Act and resolve them by paying employees the back wages they are owed, avoiding additional fines and the expensive and time-consuming process of litigation. A similar program was offered under the Bush administration during the 2000s, but the Wage and Hour division took a more aggressive enforcement approach under former President Barack Obama, often assessing double damages.
Wage and hour disputes already being litigated or investigated are not eligible for resolution through the PAID program, nor can employers use it to resolve the same violation twice. Advocates of the PAID program consider it a win-win for employers and employees, allowing underpaid workers to be made whole much more quickly, without having to pay attorney fees. Critics, however, say it goes against the division’s role as an enforcer of employment law and lets unscrupulous employers off the hook, while also expressing concern over having voluntary self-audits take the place of Labor Department investigations.
Among those critics are a number of state attorneys general, who co-signed a letter sent by New York’s Attorney General Eric Schneiderman on Wednesday to Labor Secretary Alexander Acosta informing him that they had serious concerns about the PAID program and would not refrain from pursuing wage and hour investigations under state law against employers who participate in it:
When the US Department of Labor proposed a new rule in December concerning the treatment of tips under the Fair Labor Standards Act, the proposal drew fire from critics who said it effectively permitted employers such as restaurants to withhold their employees tips. The regulation, which would only apply to employers who pay a full minimum wage and do not take a tip credit, would allow these employers to require that tips be pooled and shared with back-of-house staff who do not traditionally receive direct tips, such as restaurant cooks and dishwashers—a practice banned by the Obama administration.
A stipulation in the regulation that managers could use pooled tip money to make structural improvements, like expanding the dining area, or to lower menu prices, led employee advocates to argue that it would result in many tips not accruing to employees at all. The Labor Department publicly contended that these fears were baseless, but last month, an internal analysis of the proposal’s impact came to light, showing that employees could indeed lose out on billions of dollars in tips. Senior officials in the department shelved the analysis and ordered staff to revise their methodology to produce a more favorable result. The revelation cast doubt on the future of the rule and led to calls from members of Congress to discard it and warnings from state attorneys general that the department may have broken the law in rolling out the proposal.
The rule is still pending, but now, if it does come into effect, it will do so with its critics’ main objection addressed.
The Fifth Circuit Court of Appeals issued a ruling on Thursday vacating the controversial “fiduciary rule” enacted by the Labor Department during the Obama administration, which would have required financial advisors to act in their clients’ best interests when advising them about retirement. The ruling overturned a February 2017 district court decision upholding the regulation, with a three-judge panel ruling 2–1 that its implementation had violated the Administrative Procedure Act. Politico’s Morning Shift newsletter called Thursday’s decision “a victory for the financial services industry,” whereas labor activists were dismayed:
A range of business associations — including the U.S. Chamber of Commerce, a plaintiff in the case — said in a joint statement that the court “ruled on the side of America’s retirement savers.” The groups have thrown their weight behind an effort by the Securities and Exchange Commission to draft a separate standard for advisers, which they say should “not limit choice for investors.” On the other hand, Christine Owens, executive director of the National Employment Law Project, said the ruling “threatens the Labor Department’s very ability to protect retirement investors now and in the future” — and encouraged an appeal.
Thursday’s decision was handed down just two days after another federal court, the Tenth Circuit, issued a ruling in a separate case concerning the treatment of fixed indexed annuities under the rule. That court found that the Labor Department had satisfied its obligations under the Administrative Procedure Act in amending the rule to make sales of such annuities ineligible for Prohibited Transaction Exemption 84-24 (Proskauer attorneys outline the particulars of the ruling in more detail at JD Supra).
In agreeing with the department’s decision to amend one facet of the fiduciary rule, the Tenth Circuit’s ruling could be interpreted to implicitly uphold the regulation as a whole, although that was not at issue in the case. Yet another fiduciary rule case is still pending in federal court as well, so industry experts are advising retirement plan sponsors to remain compliant with the rule for the time being, Paula Aven Gladych notes at Employee Benefit News: