ISSUE: Labor and Employment Legislative Updates

As Congress closes out this year's legislative session and returns in 2018 following the holiday break, employers should have on their radar several labor and employment bills currently pending on Capitol Hill that could, if enacted, change the game for businesses. Earlier last month, the U.S. House of Representatives passed the Save Local Business Act (H.R. 3441), which would, as we previously reported, amend the National Labor Relations Act and Fair Labor Standards Act and reverse the Obama labor board's expanded theory of joint employer liability by limiting an employer's potential liability to workplaces only under their "actual, direct and immediate control." In practical terms, this would free franchise organizations from assuming liability for their local chains, which often set their own workplace policies. A companion bill has not yet been introduced in the U.S. Senate, where Republicans will need to sway enough Democratic senators to avoid a filibuster. Close observers are optimistic that such a bill will be introduced shortly.

Employers should also be aware of two additional bills which could significantly impact labor relations. The first, the Employee Rights Act (S. 1774), was introduced in September of this year by Senator Orrin Hatch (R-Utah). It includes broad revisions of the National Labor Relations Act affecting, among other things, union access to employee information, certification elections and contributions to union political operations. The second, the National Right-to-Work Act (H.R. 785), was introduced earlier this year by Representative Steve King (R-Iowa), and would block employers and unions from including mandatory dues provisions in collective bargaining agreements, thus federalizing a trend that has already swept many states across the country. A companion bill (S. 545) has been introduced in the U.S. Senate by Senator Rand Paul (R-Kentucky).

Both the Employee Rights Act and National Right-to-Work Act have been referred to Congressional committees, but it is yet to be determined whether the bills will be acted on or will die in committee as more pressing legislative concerns take precedence.

IMPACT: We will continue to monitor the relevant legislation and provide updates of any major developments as these proposals work their way through the legislative process.

For more information, please contact Rob Vaught at robert.vaught@quarles.com, Mike Aldana at michael.aldana@quarles.com or Tyler Roth at tyler.roth@quarles.com.

ISSUE: Federal contractors are required to do a number of tasks during the affirmative action plan year. Because those tasks are not reported on until an OFCCP audit, they often fall to the bottom of the "to do" list. Now is a good time to pull that plan off the shelf (or electronic folder) to see how the Company is doing on what it said it was going to do in the plan year. Some of the most significant follow up items by contractors are as follows:

  1. Review the results of adverse impact analyses for applicants to hires, employees to promotions, and employees to terminations, and follow up on the results that are statistically significant to ensure the Company can explain the results.
  2. Review personnel processes for individuals with disabilities and protected veterans in a form that allows the contractor to prove its review (i.e., a checklist). Common issues are accessibility of parking lot and building, Braille signage, visibility of posters to person in a wheel chair, and accessibility of web site.
  3. Audit compliance with periodic review of physical and mental qualifications in job descriptions, review of denied requests for reasonable accommodation, implementation of anti-harassment practices related to disabled individuals and protected veterans, designation of person responsible for affirmative action in all communications, annual manager training on a contractor's obligations, progress against disabled individuals' goal of 7%, and the contractor's hiring benchmark for protected veterans. This review should be documented so the contractor may show its audit to OFCCP.
  1. Review purchase order terms and conditions to ensure OFCCP's required clauses are included.
  2. Update the EEO policy for the upcoming calendar year and get it signed so it may be posted (calendar year AAPs only).
  3. Ensure the contractor posted an "Invitation to Self-Identify" to encourage protected veterans and disabled persons to self-identify themselves to the Company.
  4. Assess external recruitment sources for protected veterans and disabled persons and be willing to end relationships with poor performing sources. Again, document your assessment.
  5. Prepare report on affirmative action results to management.
  6. Conduct discrimination-focused compensation analysis, which is an annual requirement for a contractor.

IMPACT: As the saying goes, an ounce of prevention is worth a pound of cure.

If you have any questions about OFCCP or affirmative action, please contact Pamela Ploor at 414-277-5661 or pamela.ploor@quarles.com.

ISSUE: Important year-end-related employee benefit legal changes to keep in mind, along with recent developments, include the following.

Health Plans

1. IRS Enforcement of ACA Rules. The IRS announced that it would begin enforcing, in November 2017, the Employer Shared Responsibility Rules ("ESR Rules") which began applying in 2015. These rules generally require "large" employers (usually with 50 or more full-time employees) to offer sufficient health plan coverage or risk a tax penalty.

Affected employers will receive IRS Letter 226J informing them of the penalty. Employers will only have 30 days to respond to the letter and file an appeal. If you believe you might receive such a letter, you should ensure that you have proper documentation in place to respond. Also note that this enforcement is not just theoretical -- we have already seen clients impacted by this shift in enforcement.

2. Reducing Hours to Minimize ESR Rule Risks. Speaking of the ESR Rules, some employers chose to reduce the hours of employees from above 30 hours per week (e.g., 35 or 40 hours per week) to less than 30 hours per week. This "hours management" strategy could reduce an employer's liability under the ESR Rules. However, it could raise risks in other areas, such as the nondiscrimination rules of ERISA Section 510.

Few cases address whether an employer has risk under ERISA Section 510 when it reduces an employee's hours to avoid having to provide health insurance. But that did not prevent plaintiff lawyers from suing Dave & Buster's, the restaurant chain, for its use of this strategy. The plaintiffs claimed that the strategy violated ERISA Section 510. In 2016 Dave & Buster's attempted to have the case dismissed, but that effort failed. On November 17, 2017 a proposed settlement was announced relating to 1,200 employees who were impacted by reduction in hours. The proposed payment to the plaintiffs was $7.4 million. Employers who used this strategy should review the settlement and verify whether the settlement raises additional risks.

3. Delay of Disability Regulations. New disability claims procedure regulations were issued at the end of the Obama administration. The new regulations would require, as of January 1, 2018, additional protections for plan participants who are seeking disability benefits. The disability benefits could be provided in many types of plans, including health plans and even retirement plans -- i.e., not just disability plans are impacted.

The Trump administration announced that they were reviewing the regulations and contemplating: (a) a delay to the effective date; and (b) a substantial change or revocation to the regulations. The day after Thanksgiving the Department of Labor ("DOL") announced that the regulations were being delayed until April 1, 2018. The DOL will use this additional time to determine whether to modify the regulations, scrap the regulations entirely, or keep them all in place, as is.

Retirement Plans

There have not been a large number of legislative or regulatory changes for retirement plans recently. That very well may change in the near future. Tax reform efforts in the U.S. Senate and House of Representatives will likely lead to retirement plan changes. Those could include a reduction in the amount of pre-tax contributions that can be made to 401(k) retirement plans. Other regulatory changes are still pending. These include a likely delay of certain aspects of a new DOL fiduciary rule.

One interesting new development is October 2017 guidance from the IRS on locating lost or missing participants who must, under Section 401(a)(9) of the Internal Revenue Code (the "Code"), receive a required minimum distribution ("RMD") from a retirement plan. If a plan sponsor cannot find a missing participant and therefore cannot make an RMD, does that cause the plan to violate the Code? Would that violation put the plan's tax-qualified status at risk?

The IRS guidance provides some reassurance that the tax-qualified status will not be at risk, as long as the plan sponsor takes these steps:

(1) Search plan, plan sponsor and public records for alternative contact information;

(2) Use a search method such as a commercial locator service, a credit reporting agency or a proprietary internet search tool for locating individuals; and

(3) Attempt to contact the person through U.S. Postal Service certified mail.

Failing to do so may cause the IRS to (in the words of the IRS guidance), "challenge a qualified plan for violation of the RMD standards". So plan sponsors should take steps to ensure they satisfy these new, IRS-approved steps.

IMPACT: Some of these changes are procedural and others pose risks of penalties. Benefits managers should carefully monitor changes as the regulatory environment continues to shift under the Trump administration.

To learn more about how these changes may impact your particular employer-sponsored plans, please contact John Barlament at john.barlament@quarles.com.

ISSUE: Immigration Compliance Changes for Employers in 2017

Highly Skilled Workers: The Department of Homeland Security issued a new regulation on January 17, 2017 for highly skilled workers. The new rule changed the way certain Employment Authorization Document (EAD) applications are adjudicated, eliminating the 90-day processing rule but allowing Adjustment of Status applicants to continue working based merely on a timely filed pending EAD renewal. In contrast, H-4 and L-2 EAD applicants are required to file their EAD renewals in time to receive the new EAD before the old one expires. Practically, this means H-4/L-2 EAD applicants must now file their EAD renewal applications 5-6 months in advance to avoid a gap in work authorization. The new rule also provides a 60-day grace period to certain temporary workers whose employment terminates. This gives employees sufficient time to apply for a change of status, depart the country, or find another employer before their status terminates. It also provides a window of opportunity for a new employer to file the necessary paperwork for an incoming employee before they run out of status. Finally, the new regulation clarifies the eligibility rules for H-1B exempt organizations.

Presidential Travel Orders for Certain Foreign-Nationals: On December 4, 2017, the U.S. Supreme Court allowed the third presidential proclamation restricting admission to the United States for certain foreign-nationals to go into effect. The proclamation temporarily restricts travel to the United States by citizens of Chad, Iran, Libya, North Korea, Yemen, Syria, Somalia and Venezuela. The restrictions vary by country and can be found here on the U.S. Department of State's website (https://www.dhs.gov/news/2017/09/24/fact-sheet-president-s-proclamation-enhancing-vetting-capabilities-and-processes). The rules surrounding visa issuance and subsequent admission in the country for individuals effected by the travel restrictions can be complicated and are subject to continuing changes.

Status of DACA Program: On September 5, 2017, the Trump Administration announced a scheduled repeal of the Deferred Action for Childhood Arrivals (DACA) program. The program grants work permits to young adults who, as children, overstayed their visas or entered the U.S. without lawful inspection. The program will be phased out on March 5, 2018, by which point Congress will need to create a legislative remedy or else the approximately 800,000 DACA recipients will lose their work permits and protection from deportation.

Immigration Audits, Investigations and Site Visits of U.S. Employers: All immigration-related agencies are expected to increase audits, investigations and site visits of U.S. employers in connection with immigration, I-9 and E-Verify compliance. This includes the Department of Homeland Security, the Department of Labor, and the Department of Justice. Civil fines and in certain limited situations criminal penalties can ensue where non-compliance is discovered.

IMPACT: In keeping with the new rules governing EAD processing, employers should pay careful attention to make sure that EAD renewal applications are filed in a timely manner. In many cases, this will mean submitting the renewal application far in advance of the expiration date of the current EAD. Failure to do so could result in the employee temporarily losing his or her work authorization while waiting for the renewal to be processed.

When considering a new-hire candidate for visa sponsorship, employers can now take the 60-day grace period into consideration. For example, if a candidate was terminated from his/her last job less than 2 months ago, there could be enough time to quickly prepare and file a change of employer application on behalf of the sponsored employee to preserve his or her immigration status and work authorization. By the same token, if an employer needs to terminate a sponsored worker's employment for any reason, they can do so knowing that the individual may have as much as 60 days of grace remaining on their immigration status after the date of termination. As with any termination, employers are strongly encouraged to consult with legal counsel beforehand.

The repeal of DACA is primarily an I-9/E-Verify issue for employers. To ensure full compliance, employers should have reminders in place to follow up with any employee with an expiring work authorization document, including DACA-based employees. It is critical to be proactive in this respect so as to avoid inadvertent unauthorized employment.

In this era of extreme vetting and stepped up enforcement, it is imperative for employers to review their immigration paperwork to ensure that it is in full compliance in the event of an audit, investigation or site visit by a government agency. Whether it is I-9/E-Verify compliance files, H-1B public access files or immigration sponsorship files for temporary workers, companies can avoid fines and other penalties by providing frequent training to their HR professionals and conducting periodic inspections of their immigration paperwork.

To view a recent Quarles & Brady webinar discussing The Year in Review: Immigration Compliance for Employers in 2017, please click here.

For more information, please contact Eric Ledbetter at eric.ledbetter@quarles.com.

Nomination of New OSHA Leadership and Changes to the Submission Deadline for Electronic Reporting of Workplace Injuries and Illnesses

On October 27, 2017, President Trump nominated FedEx safety official Scott Mugno to lead the U.S. Labor Department's Occupational Safety and Health Administration (OSHA). Mugno started with FedEx Express in 1994 as a senior attorney for domestic regulatory affairs and became managing director of safety, health and fire prevention in 2000. He has worked for FedEx Ground as vice president for safety, sustainability and vehicle maintenance since 2011, thus bringing private sector and workplace safety experience with him to the government agency tasked with enforcing workplace health and safety rules. If confirmed by the Senate, Mugno would take over for Loren Sweatt, the acting assistant secretary of labor for occupational safety and health.

Under the Trump Administration, there has been an obvious movement away from the pro-employee policies and agendas proposed under President Obama. For example, the Trump Administration's regulatory agenda released earlier this year moved several unfinished regulations, including proposals to protect workers from infectious diseases and workplace violence, onto OSHA's "long-term" action list, signaling that they are not a priority.

Mugno has given no indication whether he will focus on changing existing regulations rather than creating new ones, but workplace health and safety experts expect that he will continue the Trump Administration's prioritization for deregulation.

IMPACT: One newly implemented regulation Mugno will be responsible for overseeing and which employers continue to follow closely is OSHA's "Improve Tracking of Workplace Injuries and Illnesses" rule, which requires employers in certain high-risk industries or those with over 250 employees to electronically submit to OSHA their injury and illness data from year 2016. As we previously reported, the deadline for the electronic submission of workplace injuries and illnesses was set for December 1, 2017 after being postponed multiple times and OSHA's temporary shutdown of its online reporting Injury Tracking Application back in August of 2017 due to a potential security breach. Just this last month, OSHA extended the electronic reporting deadline once again to December 15, 2017, giving affected employers additional time to become familiar with the reporting system according to a Department of Labor statement. Affected employers must use OSHA's Injury Tracking Application (ITA) to submit this data: https://www.osha.gov/injuryreporting/ita/. According to OSHA, the following OSHA-approved State Plans have not yet adopted the requirement to submit injury and illness reports electronically, and therefore, establishments in these states are not currently required to submit their data through ITA: California, Maryland, Minnesota, South Carolina, Utah, Washington, and Wyoming.

For more information on Trump's pick to lead OSHA or OSHA's electronic reporting requirements, contact Fred Gants at Fred.Gants@quarles.com.

ISSUE: What’s that Smell? Medicinal Marijuana Spells Change in the Air for Employee Drug Testing Policies

In states that have legalized the use of marijuana for medicinal purposes, employers may no longer be able to deny employment to applicants who test positive for marijuana. In a recent decision, the Massachusetts Supreme Judicial Court held that a state law legalizing the use of medicinal marijuana justified a former employee’s disability discrimination claim, despite the fact that marijuana is still illegal under federal law.

In Barbuto v. Advantage Sales and Marketing, LLC, the Massachusetts Supreme Court rejected a employer’s argument that a former employee was not a “qualified handicapped person” under Massachusetts law because the accommodation she sought—her continued use of medical marijuana—is a crime under federal law. After accepting an entry-level position, the plaintiff notified a company representative that she would test positive for marijuana on a mandatory drug test because she was prescribed the drug to treat her Crohn’s disease. The representative told her that her medicinal use of marijuana would not be a problem. After she completed her first day of work, plaintiff received a call from HR, notifying her that she was being terminated for testing positive for marijuana because “we follow federal law, not state law.”

“The fact that the employee's possession of medical marijuana is in violation of federal law does not make it per se unreasonable as an accommodation,” the Massachusetts Supreme Court reasoned. “The only person at risk of federal criminal prosecution for her possession of medical marijuana is the employee. An employer would not be in joint possession of medical marijuana or aid and abet its possession simply by permitting an employee to continue his or her off-site use.”

IMPACT: As the first case of its kind, Barbuto sets the stage for how medicinal marijuana use in the workplace may be treated by courts in the future. It remains to be seen how this court’s line of reasoning will play out for employers with statutorily or contractually required drug-free workplace programs that include testing for marijuana. As this area of law continues to develop, employers operating in states that have legalized the medicinal use of marijuana should consider the following:

  • Ensure that their drug testing policy is up to date and clearly states the employer’s position on marijuana use.
  • Be cautious with regard to denials based on a positive drug test.
  • If an employee requests an accommodation involving the use of medicinal marijuana, engage the employee in the interactive process and contact your local Q&B attorney for further assistance.

Please contact Otto Immel at 239-659-5041 / otto.immel@quarles.com for answers to your specific questions.

ISSUE: Trump Administration Torpedoes Compensation Portion of EEO-1 Report Due March 31, 2018

On August 29, 2017, the Office of Management and Budget (OMB) delayed the new compensation and hours component of the EEO-1 report that the Equal Employment Opportunity Commission (EEOC) revised on September 29, 2016. The stated reasons for the delay were concerns that the compensation and hours data collection was impractical, overly burdensome, and did not sufficiently protect privacy and confidentiality.

IMPACT: The OMB action essentially cancels the compensation and hours component of the report. EEOC must submit a new EEO-1 data collection package for OMB to review and publish a notice in the Federal Register announcing the delay of the implementation of the changes and the authorization for use of the prior EEO-1 report form. For now, employers with 100 or more employees and federal contractors with 50 or more employees should plan to use the prior EEO-1 report for their next filing on March 31, 2018. While this is great news, the march toward pay transparency and pay discrimination claims continues. Increasing numbers of state and local laws, activist shareholders of public companies, and company announcements of the results of their pay equity analyses continue the pay equity pressure on companies. Privileged compensation analyses are still recommended.

If you have any questions on the EEO-1 report form or on pay equity, please contact Pamela Ploor at 414-277-5661 / pamela.ploor@quarles.com or your Quarles & Brady attorney.

ISSUE: New ERISA Disability Regulations Comply Now or Wait for a Possible Delay?

In December 2016, the U.S. Department of Labor ("DOL") issued final regulations relating to claims procedures for disability benefits. These regulations came at the tail end of President Obama's administration. The claims procedures provided for some immediate, and rather modest, changes. But they made more substantial changes for claims made on or after January 1, 2018. Many plan sponsors have begun identifying how these rules will impact their claims administration process. That is likely a good idea.

IMPACT: Scope of Rules. The new regulations are somewhat unique in how broadly they apply. They clearly apply to disability plans which are subject to ERISA's claims procedure rules (e.g., some, but not all, short-term disability plans; most long-term disability plans). But they also apply to other plans that base benefits upon an individual's disability. For example, retirement plans may provide for a benefit distribution, or perhaps vesting, upon a disability. The new regulations apply to the retirement plan's determination of whether a "disability" exists. Thus, plan sponsors should examine all health, welfare, retirement plans – and even executive compensation plans – to determine if they are impacted by these new rules.

Note that there is an exception where a plan does not determine "disability" but instead relies upon a different entity's determination of disability. For example, suppose a retirement plan provides a benefit if a person is determined to be "disabled" by the Social Security Administration or an employer's long-term disability plan. The decision is being made by the third party entity. That entity (e.g., the employer's long-term disability plan) may be subject to the new claims procedure rules. Or it may not (e.g., the Social Security Administration). But the retirement plan would not be subject to the new rules because it is not making its own, independent determination of "disability". It is just relying on another entity for that determination.

New Rights for Individuals. Under the new regulations, individuals covered by the plan receive new rights and plans have new obligations. These include:

  • Denial notices must discuss why the claim was denied. This includes an explanation if the plan disagrees with the individual's experts. The standards used by the plan must be discussed;
  • Appeal-related denial notices must include a statement about the individual's right to bring a legal action and any deadlines applicable to such an action;
  • If the plan considers new or additional evidence or rationales, the plan must notify the individual;
  • If at least 10% of residents in a claimant's county speak the same non-English language, the notice may need to contain a discussion of language assistance services;
  • If the plan fails to strictly follow the rules, the individual may bring a lawsuit without exhausting the claims procedure; and
  • Those who are deciding claims and appeals on behalf of the plan must be independent and impartial.

Act Now or Wait? The DOL notice announcing a review of these regulations (View Rule) suggests (but does not firmly promise) that the DOL may make an announcement about its review in September 2017. That may provide enough time for plan sponsors to work in October through December 2017 to ensure compliance. But many plan sponsors may find that time period too short to take action. For those who are comfortable waiting (knowing they may need to act more quickly at the end of the year), a modest wait is fine. But for those who need additional time, they likely must act now, even though the regulations may be delayed, modified or revoked.

For more information, contact John Barlament at 414-277-5727 / john.barlament@quarles.com.

As of August 24, 2017, OSHA has temporarily shut down its ITA portal for electronic submission while the agency investigates a "potential compromise" of an employer's electronic data. The Department of Labor has notified the affected employer, and OSHA is currently working to examine the issue and determine the extent of the problem. Given this setback and the Trump Administration's recent suggestions that it is considering reversing the electronic submission requirement entirely, employers should continue gathering their relevant recordkeeping requirements but hold off on electronic submission until further notice.

ISSUE: OSHA's Final Rule "Improve Tracking of Workplace Injuries and Illnesses" Imposes New Electronic Submission Requirements on Employers

In May of 2016, the Occupational Safety and Health Administration (OSHA) issued a final rule "Improve Tracking of Workplace Injuries and Illnesses" to revise its existing recording and reporting occupational injuries and illnesses regulation. The final rule requires employers in certain industries to electronically submit to OSHA injury and illness recordkeeping data included on the 300A, 300, and 301 forms. The final rule also includes provisions that encourage employees to report work-related injuries or illnesses to their employers and prohibits employers from retaliating against workers for doing so.

IMPACT: Employers with 250 or more employees that are currently required to keep OSHA injury and illness records must electronically submit data contained in OSHA forms 300A, 300, and 301, except for those fields that contain personally identifiable information (e.g., employee name, address, and health care provider). Employers with 20 to 249 employees that are classified in certain high risk industries must electronically submit all data fields currently contained in the OSHA form 300A. OSHA will provide a secure website for the electronic submission of information but intends to make the submitted data readily available to the public in standard open formats on its website, and interested parties will be able to search and download the data.

The electronic reporting requirements will be phased in over two years. When the final rule was first published in May of 2016, the first electronic submission deadline for all covered employers of their 2016 Form 300A was set as July 1, 2017. In June of 2017, however, OSHA published a notice of proposed rulemaking to extend this deadline to December 1, 2017. Next year, employers with 250 or more employees will be required to submit information from all 2017 forms (300A, 300, and 301) by July 1, 2018. Similarly, employers with 20-249 employees in certain high risk industries will have to submit information from their 2017 Form 300A by July 1, 2018. Beginning in 2019 and every year thereafter, the information for all covered employers must be electronically submitted by March 2.

Employers should make their electronic submissions of recordkeeping information online at OSHA's Injury Tracking Application (ITA) launch page, which can be found here.

For more information about the electronic submission requirements, please contact Fred Gants at 608-283-2618 / fred.gants@quarles.com.

ISSUE: International Travel Tips for Foreign Nationals in the Current Immigration Climate

Foreign nationals traveling abroad during the summer and holiday months may encounter circumstances that impact their return to the U.S. and even necessitate unforeseen delays in obtaining visas at the U.S. consulates abroad. October 1 is an important deadline for the automatic change of status for visa students working pursuant to the "cap-gap" work authorization. Many delays or inadvertent problems can be avoided with proper planning.

IMPACT: As foreign nationals travel abroad during the summer and holiday months, here are a few items to consider when exiting and reentering the United States to make travel plans run smoothly:

  • We have witnessed much back and forth this year between the Trump Administration and the federal courts regarding the President's Travel Ban. Currently, the travel ban applies to foreign nationals from Iran, Libya, Somalia, Sudan, Syria, and Yemen who cannot demonstrate a "bona fide relationship" with a qualifying individual, business or organization in the United States.
  • Heightened scrutiny has led to delays in visa issuance at U.S. consulates around the world. If an employee requires a new visa stamp to return to the United States, he/she should schedule a visa appointment early in the trip and have a plan if the visa application is held up in administrative processing, which can cause delays lasting several weeks or longer.
  • F-1 visa students working pursuant to "cap-gap" work authorization who leave the U.S. before USCIS approves the H-1B petition will abandon the request to automatically change status from F-1 to H-1B on October 1. Although the underlying H-1B petition may still be approved, the individual will be required to exit the United States, obtain an H-1B visa at a U.S. consulate, and then reenter in order to effectuate an H-1B status. In certain situations, an F-1 student may lose his/her work authorization after traveling abroad during the cap-gap. However, if the H-1B petition and change of status request have already been approved, the employee usually may travel abroad without disrupting his work authorization and his/her H-1B status will still go into effect on October 1.
  • Premium Processing for most H-1B extension categories remains suspended. Lengthy processing times can complicate international plans if an employee requires a new H-1B visa stamp while abroad.