Category Archives: Employment Law

IRS to Assess “Play or Pay” Penalties Against Employers for 2015

Earlier this month, the IRS announced that it will be moving forward with issuing the first penalties against employers for failing to provide the health care coverage required by the Affordable Care Act (ACA). For a time, it was unclear whether ACA employer penalties would be enforced. In early 2017, the President had issued an executive order directing federal agencies to minimize the “economic and regulatory burden” of the ACA. However, attempts by the President and members of Congress to repeal the ACA have so far been unsuccessful.

The ACA is still currently in effect, and the IRS intends to enforce the employer shared responsibility payment (ESRP)—also known as the “pay or play” penalty—for the year 2015. In 2015, employers with 100 or more full-time employees (or the equivalent of 100 full-time employees) were required to provide health care coverage to 70% of their full-time employees. The health care must also have met minimum requirements for affordability and coverage.

Employers that failed to provide health care coverage at all in 2015 are subject to a penalty of $2,080 per full-time employee. However, for 2015, the first 80 employees are excluded from the penalty calculation. For example, an employer that failed to provide coverage to its 100 employees will only receive a penalty for 20 employees. The penalty is calculated on a monthly basis, so employers that provided health care for a portion of the year will receive a proportionate penalty. Different penalties may apply if coverage was provided, but it didn’t meet the minimum specifications.

By the end of 2017, the IRS will send out a Letter 266J to employers that failed to meet the above requirements. The letter will include an estimate of the penalty. Employers must either pay the fee or contest the penalty within the stated amount of time, typically 30 days.

For now, the penalty will be for the 2015 calendar year. Since then, the ACA has imposed different requirements. From 2016 on, all employers with 50 or more full-time equivalent employees must provide health coverage to 95% of their full-time employees. To learn more, see our article on employer obligations under the ACA in 2018.

Deadline Approaches for California Wildfire Victims to Apply for Federal Disaster Unemployment Assistance

In October, a series of raging wildfires caused multiple fatalities and injuries and destroyed thousands of homes and businesses in California. Although the fires are now contained, many communities are just beginning to pick up the pieces in places like Santa Rosa, Napa, and Sonoma. It also means that thousands of Californians are out of jobs.

The federal Disaster Unemployment Assistance (DUA) program provides financial assistance to employees who have lost their jobs due to a major natural disaster. DUA benefits are available only to employees who are ineligible for regular unemployment benefits through the state. Employees receiving other state benefits, such as temporary disability insurance benefits, are not eligible for DUA benefits.

The California wildfires were declared a major natural disaster on October 10, 2017 in the counties of Sonoma, Napa, Nevada, Mendocino, Lake, Butte, Orange, and Yuba. DUA benefits are available to employees who live or work in one of these counties and who, due to natural disaster:

  • no longer have jobs or a place to work
  • are unable to reach their place of employment
  • are self-employed and unable to work
  • cannot work due to injury, or
  • are now the head of their household due to a family member’s death.

DUA benefits are calculated in the same manner as regular California unemployment benefits. However, the minimum payment is 50% of the average benefit amount in the state. Benefits are paid for up to 26 weeks. (To learn more about benefit rates, see our article on California unemployment benefits.)

Those seeking benefits should file an unemployment claim with the California Employment Development Department (EDD) and indicate that they are unemployed due to a natural disaster. The EDD will determine the employee’s eligibility for either regular unemployment or DUA benefits. The deadline to apply for DUA benefits is November 16, 2017.

More New Parents Have Access to Job-Protected Leave in California

Late last week, California Governor Jerry Brown signed a bill into law that will expand job-protected leave for new parents. Over 2.5 million California employees will now have the right to be reinstated to their jobs after taking up to 12 weeks of unpaid bonding leave. The law takes effect on January 1, 2018.

Until now, only employees who worked for employers with 50 or more employees could be eligible for job-protected leave to bond with a new child in California. Employees who worked for smaller employers could still receive paid family leave benefits from the state when taking time off for these purposes, but they did not have the right to job reinstatement when their leave was over.

The new law, called the New Parent Leave Act, requires employers with between 20 and 49 employees to provide up to 12 weeks of job-protected leave each year to bond with a new child. At the end of their leave, employees must be reinstated to the same job or a comparable one. They also have the right to continued group health care coverage during their leave.

Employees must meet the same eligibility requirements under the FMLA and the California Family Rights Act (CFRA): The employee must have worked for the employer for at least 12 months, have worked at least 1,250 hours in the year prior to the claim, and work at a location where the employer has at least 20 employees in a 75-mile radius.

The New Parent Leave Act extends job-protected leave only to employees who are taking family and medical leave to bond with a child arriving by birth, adoption, or foster placement. It doesn’t apply to employees taking FMLA or CFRA leave for their own serious health conditions or to care for a family member with a serious health condition. Those employees must still work for an employer with at least 50 employees in order to take job-protected leave.

Texas Federal Court Invalidates Overtime Rule

Late last week, a Texas federal court judge struck down the Obama-era overtime rule that would have extended overtime pay to millions of workers.

In 2016, the Department of Labor (DOL) passed a final rule to increase the minimum salary required for employees to qualify as exempt from receiving overtime. By raising the annual salary requirement from $23,660 to $47,476, the DOL estimated that 4.2 million employees would become eligible to receive overtime pay. However, several states and business groups filed legal challenges in court to block the rule from taking effect. In November of 2016, a federal court judge in Texas delayed the rule from taking effect until it could be reviewed and decided upon.

Last week, the same judge ruled that the DOL overstepped its legal authority by raising the salary threshold so high. To be exempt from overtime, an employee must not only earn the minimum salary, he or she must also perform certain types of work—for example, executive, administrative, or professional work. (To learn more, see our article on the white-collar exemptions.) The judge held that the DOL’s rule placed too much importance on a worker’s salary rather than his or her job duties, effectively weeding out millions of workers based on salary alone.

Signs point to the DOL considering a new rule that would create a minimum salary that is higher than the current threshold of $23,660, but lower than $47,476. The Department of Labor has already issued a request for information so that it can seek input from the public on the matter. This is typically the first step in the rulemaking process. While it’s unclear what the new threshold will be, it will likely be a much more modest increase. Earlier this year, Labor Secretary Alexander Acosta stated that he would support a salary threshold around $33,000.

Seventh Circuit Rules: Sexual Orientation Discrimination Illegal Under Title VII

Earlier this week, the U.S. Court of Appeals for the Seventh Circuit became the highest court in the country to rule that sexual orientation discrimination is illegal under Title VII of the Civil Rights Act of 1964. While Title VII does not explicitly include sexual orientation as a protected class, the court held that discriminating on the basis of sexual preference is a form of gender stereotyping that qualifies as illegal “sex” (or gender-based) discrimination.

Title VII has long prohibited employers with 15 or more employees from discriminating on the basis of certain characteristics, such as sex. Over the years, some courts have expanded the definition of what qualifies as sex discrimination. For example, the Supreme Court has held that same-sex harassment is illegal (a man harassing another man, or a woman harassing another woman).  And some federal circuit and district courts have held that discrimination based on gender stereotypes—such as a woman not being feminine enough or a man being too effeminate—qualifies as illegal sex discrimination.

Based on these legal precedents, the Equal Employment Opportunity Commission (EEOC) has started to pursue claims against employers for discriminating against gay and lesbian employees. However, the EEOC’s interpretation is not authoritative, and not all courts agree that sexual orientation discrimination is prohibited by Title VII.

The U.S. Court of Appeals for the Seventh Circuit recently sided with the EEOC, holding that sexual orientation discrimination is a form of illegal sex discrimination until Title VII. This decision is contrary to the recent holdings of the Eleventh and Second Circuits, which decided that sexual orientation discrimination is not illegal under Title VII. As a result, there is now a split of authority among federal appeals courts—which could mean that the issue will make its way up to the Supreme Court.

Several states and cities already expressly prohibit sexual orientation discrimination. To learn more, see our state articles on employment discrimination.