On Wednesday, September 12, the Employee Benefits Security Administration (EBSA), which is a division of the Department of Labor (DOL), released another FAQ indicating that no penalty or fine will be applied for failing to provide the exchange notice.1 While this could be viewed as indicating that the Exchange Notice requirement is now optional, the statutory obligation to provide this notice still remains.
The Exchange Notice arose from a modification of the Fair Labor Standards Act (FLSA) which applies to all employers who are engaged in interstate commerce and gross over $500,000 annually. While employers have struggled to understand the requirement and comply with the statute, the conflicting information provided by EBSA has not helped alleviate the confusion. However, simply because no fine or penalty will be assessed on the employer for failure to provide the Exchange Notice does not mean that no adverse consequences exist. Statements made by EBSA officials after Wednesday’s announcement have indicated that failing to provide the notice could trigger an audit or additional DOL enforcement and review of the plan.
Additionally, the FLSA has an anti-retaliation provision, which prohibits employers from discharging or discriminating in any manner against employees that file any complaints or institute any proceedings under the FLSA. This may include internal complaints. Thus, employers need to be aware of any internal complaints regarding violations of the Exchange Notice requirement. Having properly given notice, however, gives employers an opportunity to avoid internal complaints about violations of this notice in the first place.
In light of these consequences, it is still advisable for employers to provide the Exchange Notice by October 1, if at all possible, and to continue doing so for all newly hired employees going forward.