On February 27, 2013, the Occupational Safety and Health Administration published its interim final rule setting forth the procedures for handling complaints brought under the whistleblower provision of the Affordable Care Act (“ACA”).  This whistleblower provision presents yet another potential hazard for the unwary employer.  Unlike most whistleblower statutes, which apply to specific industries, the ACA’s whistleblower provision applies to any “employer,” as that term is broadly defined in the Fair Labor Standards Act.[1]  Set forth below are just some examples of the hidden traps of which employers should be aware.

The “Play or Pay” Trap: Beginning on January 1, 2014, employers with at least fifty full-time employees, including full-time equivalents, will be subject to a penalty if: 1) they fail to offer ACA-compliant coverage to all full-time employees and their dependents and 2) any full-time employee receives a tax credit or subsidy through a government healthcare exchange.  While employers have been busy preparing to deal with these so-called “play or pay rules,” they may not be aware that choosing the “pay” option may subject them to liability under the ACA’s whistleblower provision.

Under the ACA’s whistleblower provision, an employer may not retaliate against any employee because the employee receives a tax credit or subsidy through a government healthcare exchange.  Thus, the mere act of choosing “pay” over “play” can set the wheels in motion for an employee whistleblower claim.  For example, an employee may be disciplined shortly after his or her employer receives notice that the employee received a tax credit or subsidy.  Even though the employer’s reason for disciplining the employee may be wholly unrelated to the employee’s participation in an exchange, the employee may nevertheless claim retaliation due to the temporal proximity between the discipline and the employer’s receipt of notice.

The “I Did Not Violate the ACA” Trap: An employer need not commit an actual violation of the ACA to be subject to a whistleblower claim.  The ACA’s whistleblower provision provides protection for employees who merely voice a concern about a possible violation.  Specifically, the ACA’s whistleblower provision prohibits retaliation against any employee who provides information relating to any act that he or she reasonably believes to be a violation of the ACA.  Under this “reasonable belief” standard, the employee need only show that he or she believed that the employer’s conduct violated the ACA and not that the employer actually violated the law.  Thus, an employer who is in full compliance with the substantive provisions of the ACA still may run afoul of the whistleblower provision.

The “ACA Does Not Apply to Me” Trap: While the play or pay provisions of the ACA apply to employers with fifty or more full-time employees, the whistleblower provision appears to be broader in scope.  Accordingly, even small employers need to be aware of the risks posed by the ACA’s whistleblower provision. For example, an employer may receive a complaint from an employee that the employer miscounted the number of full-time employees for purposes of determining whether the employer is required to provide coverage under the ACA.  The employer’s method of counting its full-time employees may be entirely correct, but, given the complexities of the ACA, the employee’s belief that the employer violated the ACA is also likely reasonable.  Thus, if the employer takes any adverse action against the employee after receiving the complaint, the employer may end up facing a whistleblower claim even though the ACA coverage provisions do not apply to the employer.

The ACA’s whistleblower provision provides an incentive for employees to report employer violations—both willful and inadvertent—of the ACA.  Accordingly, employers must be vigilant in familiarizing themselves with the ACA’s whistleblower rules so as not to fall into a whistleblower trap.  Understanding the regulations and maintaining vigorous compliance programs are the keys to avoiding and defeating whistleblower claims.  As with any law that provides whistleblower protection, employers must be careful to ensure that, if and when a possible ACA violation is reported, no adverse actions are taken against the whistleblowing employee without a legitimate, non-retaliatory, and non-discriminatory reason for the decision.