- The U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) issued a final rule governing claims under Section 18C of the Fair Labor Standards Act, which prohibits retaliation against employees who engage in certain activities protected by the Affordable Care Act (ACA).
- The final rule clarifies the broad range of activities protected by the ACA, the relatively low burden of proof for employees asserting claims under the ACA and the potentially significant liability to which employees are exposed for engaging in unlawful retaliation.
- With implementation of the ACA now in full force, the growing attraction of retaliation claims generally and issuance of OSHA's final rule on the ACA's anti-retaliation provision, employers should be prepared for an increase in retaliation and whistleblowing complaints under Section 18C.
The Affordable Care Act (ACA) added Section 18C to the Fair Labor Standards Act (FLSA) to prohibit retaliation against employees who engage in certain activities protected by the ACA. Responsibility for receiving and investigating complaints under Section 18C has been delegated to the Assistant Secretary for Occupational Safety and Health (Assistant Secretary).
On Oct. 13, 2016, the U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) issued a final rule governing employee retaliation claims under Section 18C, including procedures and time frames for filing and handling employee complaints, investigations by OSHA, appeals of OSHA determinations to an administrative law judge (ALJ), hearings by ALJs, review of ALJ decisions by the Administrative Review Board (ARB), judicial review of the ARB's final decision and interpretations of certain key terms used in the ACA's anti-retaliation provisions. To the extent possible within the bounds of applicable statutory language, the final rule was designed to be consistent with procedures applied to claims under other anti-retaliation provisions administered by OSHA, such as the Consumer Product Safety and Improvement Act of 2008.
The final rule clarifies the broad range of activities protected by the ACA, the relatively low burden of proof for employees asserting claims under the ACA and the potentially significant liability to which employees are exposed for engaging in unlawful retaliation. This alert addresses some of the key provisions of the final rule of which employers should be aware. It also sets forth recommendations for employers to prepare for, and successfully defend against, retaliation and whistleblowing claims under the ACA.
Scope of Protected Activities
Under Section 18C, an employer may not retaliate against an employee for receiving a tax credit under Section 36B of the Internal Revenue Code of 1986 (the Code) or cost-sharing reductions (referred to as a "subsidy") under the ACA. The Code allows certain individuals to receive a premium tax credit for coverage under a qualified health plan through an exchange if they are not eligible for health coverage other than in the individual market, including an offer of coverage from their employer that is affordable and provides minimum value. Individuals eligible for a premium tax credit also may qualify for cost-sharing reductions if certain other conditions are met.
Under the ACA, certain large employers are subject to an assessable payment (referred to as an "employer shared responsibility penalty") if they fail to offer coverage required by the ACA and any of their full-time employees receive a premium tax credit for coverage through an exchange. As noted in the final rule, the relationship between the employee's receipt of a premium tax credit and the potential employer shared responsibility penalty imposed on an employer could create the incentive for an employer to retaliate against an employee. Section 18C is designed, in part, to protect employees against such retaliation.
Section 18C also protects employees against retaliation because they:
- provided or are about to provide to their employer, the federal government or a state attorney general information relating to any violation of, or any act or omission that the employee reasonably believes to be a violation of, any provision of the ACA
- testified or are about to testify in a proceeding concerning such a violation
- assisted or participated, or are about to assist or participate, in any such proceeding
- objected to, or refused to participate in, any activity, policy, practice or assigned task that the employee reasonably believed to be in violation of any provision of the ACA, or any order, rule, regulation, standard or ban under the ACA
The final rule adopted a broad definition of the term "employee," consistent with other anti-retaliation statutes administered by OSHA. An "employee," who may bring a complaint under the ACA's anti-retaliation provision, includes not only current employees, but also former employees and applicants for employment.
The final rule clarifies that for purposes of the ACA's anti-retaliation provision, an employee is considered to have "received" a premium tax credit or cost-sharing reduction not only when the credit is allowed on the individual's tax return, but also when an exchange finds the employee eligible for a credit or cost-sharing reduction. That is the point at which the employee may apply financial assistance to reduce his or her share of the premium cost for coverage purchased through an exchange.
Although the final rule was not revised specifically to address concerns by several commenters that employees be protected from retaliation for taking preliminary actions to receive a premium tax credit (such as asking their employer about the healthcare coverage they offer in order to complete an exchange application), OSHA expressed its belief that existing case law under other whistleblower statutes that it administers provides protection for such actions. According to OSHA, an employee's inquiry to his or her employer to gather information necessary to apply for a premium tax credit may trigger protection under Section 18C if the employee can show that the employer's adverse action was based, in part, on either 1) the employer's belief that the employee had received a premium tax credit or 2) the employer's desire to deter the employee from taking any further action that would result in the employee's receiving a premium tax credit.
The final rule addresses the subject of when an employee will be deemed to have a "reasonable belief" of a violation of the ACA. According to the final rule, the employee must have both a subjective, good faith belief and an objectively reasonable belief that the complained-of conduct violates an applicable provision of the ACA. The requirement that the employee have a subjective, good faith belief is satisfied as long as the employee actually believed that the conduct violated the ACA. The objective reasonableness of an employee's belief is evaluated based on the knowledge available to a reasonable person in the same factual circumstances with the same training and experience as the aggrieved employee. However, the employee need not show that the conduct complained of constituted an actual violation of the law. The employee's whistleblower activity is protected when it is based on a reasonable, but mistaken, belief that a violation of the law has occurred or is likely to occur.
OSHA specifically noted that Section 4980H of the Code does not prohibit an employer from reducing an employee's hours of service in order to avoid a potential shared responsibility payment. Therefore, it disagreed with a commenter's implication that the ACA's whistleblower provision would apply if an employer reduced an employee's hours of service for that purpose. At the same time, however, it observed that reducing an employee's work hours would be unlawful under Section 18C if it was done in retaliation for activity protected under the ACA. It also would be unlawful to threaten employees with reductions in hours in order to dissuade them from applying for a premium tax credit. Determining an employer's real motive typically involves an in-depth analysis of the particular facts and circumstances of each case.
OSHA also opted for broad definitions of the terms "adverse action" and "intimidation," consistent with case law under the other whistleblower statutes that it enforces. Adverse action is not limited to action that affects an economic or tangible condition of employment. Rather, it is any action that a reasonable employee would find "materially adverse," that is, more than trivial. Specifically, the evidence must show that the employer's action "could well have dissuaded a reasonable employee from engaging in protected activity." While intimidation may be linked with some other form of adverse action, intimidation that is more than trivial may, standing alone, qualify as adverse action. Thus, unlawful retaliation would include intimidating an employee for engaging in protected activity when the intimidation would dissuade a reasonable employee from engaging in protected activity, regardless of whether it affected an economic or tangible condition of employment.
Burden of Proof and Remedies
To be timely, a retaliation complaint must be filed with OSHA within 180 days of the date when the alleged violation has occurred, that is, when the alleged retaliatory decision has been both made and communicated to the employee. In other words, the limitations period commences once the employee is aware or reasonably should be aware of the employer's decision.
Complaints filed under Section 18C need not be in any particular form. They may be either oral or in writing. When a complaint is made orally, OSHA will put it in writing. OSHA will accept complaints in any language.
Upon the filing of a complaint, OSHA is to determine whether the complaint, supplemented as appropriate by an interview of the complaining employee, alleges the existence of facts sufficient to make a "prima facie showing." To establish a prima facie showing, the facts must show the following:
- the employee engaged in protected activity
- the employer knew or suspected that the employee engaged in the protected activity
- the employee suffered an adverse action
- the circumstances were sufficient to raise an inference that the protected activity was a "contributing factor" in the adverse action, that is, that the protected activity, alone or on combination with other factors, affected in some way the outcome of the employer's decision
The employee will be considered to have met this initial burden if the complaint, as supplemented, alleges the existence of facts and either direct or circumstantial evidence to meet the required showing. According to OSHA, an employee's burden may be satisfied when, for example, the employee shows that the action took place shortly after the protected activity or at the first opportunity available to the employer, giving rise to the inference that it was a contributing factor in the adverse action.
If the employee makes the required prima facie showing, OSHA will conduct an investigation of the complaint unless the employer shows, by "clear and convincing" evidence, that it would have taken the same action in the absence of the alleged protected activity. The "clear and convincing evidence" standard is a higher burden of proof than a "preponderance of the evidence" standard. Clear and convincing evidence is that which indicates that the thing to be proved is highly probably or reasonably certain.
Assuming that the investigation proceeds beyond what OSHA calls the "gatekeeper phase," OSHA will determine whether there is "reasonable cause" to believe that protected activity was a contributing factor in the alleged adverse action. If OSHA finds such "reasonable cause," it will order relief against the employer unless the employer demonstrates, again by "clear and convincing evidence," that it would have taken the same action in the absence of the protected activity. OSHA will issue written findings regarding whether there is reasonable cause to believe that the complaint has merit within 60 days of the filing of the complaint.
If there is a reasonable cause finding, OSHA will order appropriate relief, including preliminary reinstatement, affirmative action to abate the violation, back pay with interest, compensatory damages, attorney and expert witness fees, and costs. In rare circumstances, front pay may be appropriate in lieu of reinstatement. When ordering back pay, OSHA also will require the employer to submit documentation to the Social Security Administration allocating the back pay to the appropriate period.
Objections, ALJ Hearings and Review
The parties will be advised of OSHA's findings and their right to file objections and request a hearing. If no objections are filed within 30 days, the findings and any preliminary order will become the final decision and order of OSHA. If objections are timely filed, any order of preliminary reinstatement will take effect. However, the remaining provisions of the order will not take effect until administrative proceedings are completed.
A hearing on timely-filed objections will commence expeditiously before an ALJ. The hearing will be conducted de novo, on the record. ALJs have broad discretion to limit discovery where necessary to expedite the hearing. Formal rules of evidence will not apply, but rules or principles designed to assure production of the most probative evidence will be applied. The ALJ also may exclude evidence that is immaterial, irrelevant or unduly repetitious.
The same burdens of proof applicable at the investigatory stage apply at the hearing stage. The employee must prove by a "preponderance of the evidence" that the protected activity was a "contributing factor" in the adverse action. If the employee does so, in order to avoid liability, the employer must demonstrate, by the higher "clear and convincing evidence" standard, that it would have taken the same action in the absence of the protected activity. The remedies that may be imposed by an ALJ are the same as those (discussed above) that may be imposed by OSHA at the conclusion of the investigatory stage.
The decision of the ALJ will become a final order unless a petition for review with the ARB is filed within 14 days after the date of the ALJ's decision and the ARB accepts the petition for review. An appeal to the ARB is not a matter of right; it is accepted at the discretion of the ARB. If no timely petition for review is filed, or the ARB denies review, the ALJ's decision will become the final order. If no timely petition for review is filed, the resulting final order is not subject to judicial review. Therefore, an employer must file a request for review in order to preserve its appeal rights.
When the ARB accepts a petition for review, the ALJ's factual determinations will be reviewed under the "substantial evidence" standard. The ALJ's determinations generally will be affirmed when there is such relevant evidence as reasonable minds might accept as adequate to support them, even if it is possible to draw contrary conclusions from the evidence. In addition, the ALJ's credibility determinations generally will be upheld unless they are inherently or patently unreasonable.
If the ARB grants review and finds that the employer has violated the law, it will issue a final order providing appropriate relief to the employee as provided in the statute and the final rule. If the ARB grants review and finds that the employer has not violated the law, it will issue an order denying the complaint.
Within 60 days after the issuance of a reviewable final order by an ALJ or the ARB, any person adversely affected or aggrieved by the order may file a petition for review of the order in the U.S. Court of Appeals for the circuit in which the violation allegedly occurred or in which the complaining employee resided on the date of the alleged violation.
District Court Retaliation Action
A complaining employee may bring an original de novo action in an appropriate U.S. District Court, alleging the same allegations contained in the complaint filed with OSHA, in certain circumstances. A federal court action may be brought if there has been no final decision issued within 210 days after the filing of the complaint. Such an action also may be brought within 90 days after receiving a written determination at the conclusion of OSHA's initial investigation of the complaint (i.e., whether there is reasonable cause to believe that the employer has retaliated against the employee), provided that the determination has not become a final order. As noted by OSHA, the reasonable cause determination will become a final order and not subject to judicial review, if no objection is filed within 30 days. Therefore, an employee may need to file timely objections to OSHA's initial determination in order to preserve the right to file an action in district court.
At the request of either party, the district court action shall be tried by the court with a jury. The action will be governed by the same legal burdens of proof applicable to administrative hearings under Section 18C. In addition, the court has jurisdiction to grant all of the same relief necessary to make the employee whole, including injunctive relief and compensatory damages.
Suggestions for Employers
With implementation of the ACA now in full force, the growing attraction of retaliation claims generally and issuance of OSHA's final rule on the ACA's anti-retaliation provision, there likely will be an increase in the number of retaliation and whistleblowing complaints under Section 18C. The following are suggestions for employers to minimize the chances that such complaints will be filed and maximize the ability to successfully defend against any complaints that may be filed:
- ensure that the company is complying with the substantive provisions and requirements of the ACA
- limit disclosure of information about employees who apply for or receive a premium tax credit or cost-sharing reduction under the ACA
- review existing anti-retaliation policies to ensure that they include protected activity under the ACA among the action for which retaliation is prohibited
- review existing complaint procedures to ensure that they address alleged ACA violations and ACA retaliation complaints
- promptly and effectively investigate and respond to all internal and external ACA retaliation complaints
- never say or do anything to indicate anger or animosity against an employee who engages in ACA-protected activity
- ensure that human resources and possible legal counsel review any adverse actions to be taken against employees who engaged in ACA-protected activity to ensure that they are based entirely on legitimate, non-retaliatory considerations
- ensure that the legitimate, non-retaliatory reasons for the company's action are objectively based and well-documented in order to meet the burden to prove, by clear and convincing evidence, that the company would have taken the same action in the absence of the employee's protected activity
- train supervisors and managers on the company's anti-retaliation policies and procedures