Monthly Archives: December 2016

December 22, 2016

Small Employers Permitted To Reinstate Health Premium Reimbursement Arrangements

With the health and welfare benefit plan industry eyeing potential regulatory changes under a Trump administration, President Barack Obama signed into law a new rule that partially restores health plan flexibility restricted by the Affordable Care Act (ACA). The 21st Century Cures Act (Act) allows small employers to establish arrangements that reimburse employees for premiums on health coverage that is not maintained by the employer (e.g., coverage obtained by an employee on a state exchange/marketplace).

Background On HRAs and the ACA

In 2013, the IRS released guidance stating that an employer arrangement designed to reimburse premiums for non-employer maintained health coverage (on a pre-tax or after-tax basis) is a group health plan that violates certain ACA reforms. This guidance was widely viewed to prevent employers from using a health reimbursement arrangement (HRA), integrated with non-employer maintained health coverage, as a way of circumventing the ACA employer mandate (for large employers). However, the guidance applied to all employers, much to the ire of small employers, many of whom relied on these arrangements to provide a pre-tax cost-effective health benefit. Certain transition relief was provided for small employers, but the relief ended in mid-2015. As a result, many small employers were left out in the cold.

Small employers responded in different ways. Some adopted stipend or similar programs, whereby employees would be paid additional taxable compensation without strings attached (i.e., the employee could decide to use the amounts for health coverage or not). The end-result, however, was that tax-favored health benefits were generally limited to employers capable of sponsoring a major medical health plan.

21st Century Cures Act Permits Certain HRAs

The Act permits certain small employers to sponsor arrangements that will reimburse employees on a pre-tax basis (if certain conditions are met) for amounts incurred for independent (non-employer maintained) health coverage, including health insurance premiums. These arrangements, called qualified small employer health reimbursement arrangements (QSEHRAs), must meet the following requirements:

permitted only for small employers, defined as those who did not have an average of 50 full-time employees, including full-time equivalents, in the prior year;
the employer may not otherwise offer a group health plan to any employees;
the employer must offer the QSEHRA to all employees (with certain limited exceptions);
the maximum annual benefit is $4,950 for reimbursements of employee-only coverage and $10,000 for reimbursements of family coverage;
the reimbursement will be nontaxable if the eligible employee demonstrates that he or she has minimum essential coverage; and
the employer must provide eligible employees with notice containing required disclosures.

The rule changes are intended to be effective January 1, 2017.

December 21, 2016

No Such Thing As A Free Lunch!

By Brad Cave

Hundreds of hourly employees sued their former employer alleging that they were due additional overtime pay. They asserted that the company failed to include their $35 daily travel meal reimbursement in their regular rate of pay when calculating time-and-one-half, meaning they were paid less overtime than they were due. The Tenth Circuit Court of Appeals, whose decisions apply to Wyoming, Colorado, Oklahoma, Kansas, New Mexico, and Utah, recently analyzed their claim.

Calculating Regular of Pay

The Fair Labor Standards Act (FLSA) requires employers to pay employees at one and one-half times the employee’s “regular rate” of pay for all hours worked in excess of 40 per workweek. An employee’s regular rate of pay includes all remuneration paid to the employee, subject to certain exceptions. If a part of an employee’s pay is left out of the “regular rate” calculation, the employee’s overtime rate will be undervalued.

A large group of former hourly employees for a nationwide seismic-mapping services company filed a lawsuit claiming that the company violated the FLSA by failing to include an established meal allowance, which was paid to employees while traveling, in the employees’ regular rate of pay. In their collective action, the parties asserted that the company required employees to travel away from home and stay in hotels near remote job sites for four to eight weeks at a time. Employees then typically returned home for about two to four weeks before traveling to another remote location. They often worked more than 40 hours per week while at the remote location, triggering overtime pay.

Per Diem For Meals

The company provided its employees with a $35 per diem for meals for all days at the remote location as well as the days spent traveling to and from the remote job location. The company did not pay the $35 meal reimbursement on days that employees worked from their home location or when food was provided at the remote job site.

Exception To “Regular Rate” For Traveling Expenses

The regular rate of pay generally must be calculated to include all remuneration for services paid to the employee. One exception to this rule is that employers can exclude from the regular rate all reasonable payments for traveling expenses incurred by an employee in the furtherance of his employer’s interests and properly reimbursable by the employer. The regulations state that this exemption includes the “reasonably approximate amount expended by an employee, who is traveling ‘over the road’ on his employer’s business, for . . . living expenses away from home . . . .” 29 C.F.R. § 778.217(b)(3). The company argued that the $35 meal payments were exempt travel expenses and therefore, need not be included in the calculation of the employees’ regular rate.

Meal Reimbursement Was Exempt Travel Expense

The employees countered by arguing that the $35 payments were not exempt travel expenses because the employees were no longer traveling while they worked at the remote job sites for four to eight weeks at a time. They also argued that the phrase “living expenses” did not include the cost of food. The Tenth Circuit disagreed on both arguments.

The Court reasoned that the employees’ position that they were no longer “traveling over the road” when they reached their remote job site was a “hyper-literal interpretation.” The Court instead read “traveling” more broadly to include not just time in transit, but also time away from home. On the employees’ argument that the cost of food did not qualify as a “living expense,” the Court agreed with prior determinations by the U.S. Department of Labor to find that the cost of food away from home is an additional expense that the employee incurs while traveling for the employer’s benefit and therefore, is a living expense. The Court ruled that the $35 per diem meal reimbursements were exempt travel expenses and need not be included in the employees’ regular rate when determining overtime pay. The Court upheld summary judgment in favor of the company. Sharp v. CGG Land Inc., No. 15-5113 (10th Cir. Nov. 4, 2016). Read more >>

December 14, 2016

Working Through The Haze: What Legal Marijuana Means For Nevada Employers

By Dora Lane and Anthony Hall
One in eight adults in the United States smokes marijuana, according to a 2016 Gallup poll. That means about 13% of the adult population in this country smokes pot, nearly double the percentage that reported such use in Gallup’s 2013 survey. In fact, about 22 million Americans reported they had used marijuana in the past month, according to 2014 data collected by the Substance Abuse and Mental Health Services Administration.

It is unclear whether the increase in the number of Americans reporting they use marijuana is due to an actual increase in use of the drug, or if it simply represents an increase in the willingness of survey respondents to admit to using marijuana. What is clear, however, is that more states are legalizing marijuana for both medical and recreational use. This past November, nine states had marijuana initiatives on the ballot. Voters in four states – California, Maine, Massachusetts, and Nevada – passed recreational marijuana use while voters in four other states – Florida, Montana, North Dakota, and Arkansas – passed medical marijuana initiatives. The undeniable result is that marijuana is becoming more acceptable, and more marijuana-related issues are likely to arise in the workplace.

Nevada Legalizes Recreational Marijuana Use

In November 2016, Nevada voters approved a ballot question that legalizes the recreational use of marijuana by adults. The ballot measure amends the Nevada Revised Statutes to make it lawful for a person who is 21 years of age or older to purchase, possess, and consume up to one ounce of marijuana and to grow a limited number of marijuana plants for personal use. Questions have arisen how the legalization of marijuana will impact employers.

No Marijuana Use Or Possession At Work

Under the recently passed recreational marijuana initiative, public and private employers may maintain, enact, and enforce a workplace policy prohibiting or restricting actions or conduct otherwise permitted under the new law. In other words, although the initiative provides that marijuana may be consumed without criminal prosecution by the State of Nevada, it does not affect an employer’s right to implement policies prohibiting marijuana consumption or possession. Nevada employers may, therefore, prohibit the possession and use of recreational marijuana at work.

This provision is consistent with the state’s medical marijuana law which also does not require any employer to allow the use of medical marijuana in the workplace. Consequently, even though use of marijuana may be legal in the state, employers may restrict such use and possession on its premises and while employees are on duty. And, although not specifically stated, Nevada’s marijuana laws appear to allow employers to terminate or discipline employees who violate workplace policies that prohibit using, possessing, or being impaired by marijuana while at work.

So Must Employers Tolerate Off-Duty Marijuana Use, So Long as It Is Not Done While on Duty or on Company Premises?

The short answer in our opinion is generally no, with some caveats for medical marijuana users described below, but employees’ off-duty consumption raises some difficult practical issues. First, many employers have policies prohibiting employees from being “under the influence” or “impaired” by prohibited substances while at work. It is often challenging, however, to determine when an employee is “under the influence” or “impaired” while at work. If the employee is visibly affected or slow to react, impairment may be easier to demonstrate. However, not everyone experiences side effects from marijuana consumption and even if they do, the timeframe within which the side effects can be observed may vary by individual. Accordingly, employers who prohibit employees from working while being impaired or “under the influence” should not jump to conclusions that someone was “under the influence” just because their drug screen comes back positive for Tetrahydrocannabinol (THC).

Second, employers should be mindful of NRS 613.333, which makes it an unlawful employment practice for an employer to refuse to hire a prospective employee, or to discharge or discriminate against an employee because the employee engages in the lawful use of any product outside the premises of the employer during the employee’s nonworking hours, as long as the use does not adversely affect the employee’s ability to perform his or her job or the safety of other employees. Although the statute was initially enacted to protect tobacco smokers, the recent legalization of marijuana makes the statute also potentially applicable to marijuana users.

Unlike tobacco, however, marijuana remains illegal under federal law, which begs the question whether its off-duty use is “lawful.” Currently, no Nevada cases have considered or decided this issue, but a key case involving Colorado’s lawful activities statute, C.R.S. § 24-34-402.5, was decided by the Colorado Supreme Court last year. In that case, a quadriplegic employee who used medical marijuana during non-working hours to help control his pain was terminated after a random drug test showed a positive result for marijuana in his system. He sued his employer alleging that his termination violated the Colorado lawful activities statute. The Colorado Supreme Court ruled that his termination did not violate the statute because marijuana use was unlawful under federal law. Coats v. Dish Network, LLC, 350 P.3d 970 (Colo. 2015).

Even though the Colorado case is not binding on Nevada courts, its reliance on the illegality of marijuana under federal law may be persuasive. Still, it is unclear how a Nevada court would rule if asked to decide whether an employer violates the Nevada lawful product statute by terminating or disciplining an employee due to his or her off-duty marijuana use. The risk of such a claim should be considered when making adverse employment decisions involving positive marijuana drug tests or other marijuana-related issues. Employers should also be mindful of potential developments in federal law with respect to the legalization of marijuana. Such legalization will transform marijuana into a “lawful” product under both federal and state law, and the above analysis will change greatly.

Finally, an employee who is terminated for marijuana use may attempt to argue wrongful termination in violation of public policy, given the recent marijuana legalization. Because the Nevada Supreme Court has been traditionally conservative in creating new exceptions to the at-will employment doctrine and marijuana remains illegal under federal law, such claims do not bear high likelihood of success. As mentioned above, however, legalization of marijuana under federal law will substantially affect this analysis. Read more >>

December 1, 2016

DOL Appeals Overtime Rule Injunction: Webinar At Noon (MT) Today

By Mark Wiletsky

On the very day that its final overtime rule was supposed to go into effect, the U.S. Department of Labor filed an appeal of last week’s preliminary injunction that temporarily halted the rule. The appeal will be heard by the Fifth Circuit Court of Appeals, which is located in New Orleans, Louisiana.

Will Appeal Be Expedited?

Appellate rules for the Fifth Circuit permit parties to file a motion for an expedited appeal, which means the appeal would be heard and ruled upon in a much shorter timeframe than normal, e.g., the normal timeframe for an appeal can be a year to 18 months. The court will grant such motion only for good cause. We expect that the DOL might try to expedite its appeal, especially given the change in administration coming in late January. As of this morning, however, there is no indication that the DOL has moved for an expedited appeal, but it is possible that it hasn’t been listed on the docket or otherwise been made public yet.

The DOL could also ask the district court to stay the preliminary injunction pending the appeal – in other words, to allow the new overtime rules to go into effect pending the outcome of the appeal. It is unlikely that the district court judge would grant a stay, but it would be a logical next step. Again, no motion to stay the injunction is yet listed on the court’s docket.

Webinar At Noon To Discuss Injunction and Appeal

Please join our free webinar at noon (MT) today (December 1, 2016) as I discuss what the preliminary injunction of the DOL’s overtime rule and the pending appeal mean for employers. I’ll also discuss options for employers who have been considering, or may even have implemented pay practices in anticipation of the overtime rule changes. Register for the webinar here. We will record the webinar for those unable to attend.