Following the "Chipotle crackdown," expert takes fresh look at proper I-9 procedures
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APRIL 6, 2011 / ISSUE NO. 721
A CCH PUBLICATION
IMMIGRATION
Following the “Chipotle crackdown,” expert
takes fresh look at proper I-9 procedures
Earlier this year, an immigration probe deportation of undocumented workers Complying with Form I-9
forced Chipotle Mexican Grill, Inc., a at thousands of other companies around procedural requirements
Denver-based company that owns and the country. According to the Wall Street
operates almost 1,100 restaurants around Journal, (“Immigration Audit Takes Toll” The first step in avoiding the disruption,
the country and employs over 25,000 3/15/2011) in the fiscal year that ended financial penalties and other negative con-
people, to fire hundreds of employees who on September 30, 2010, 2,740 compa- sequences of employing undocumented or
were working without proper documenta- nies were audited by ICE, resulting in a illegal workers is to properly complete and
tion. Not surprisingly, this crackdown has record $7 million in fines for businesses maintain the Form I-9. The 1986 Immigra-
reportedly caused: disruption as a result of who employed illegal workers. Fines can tion Reform and Control Act (IRCA) sought
the loss of the employees, a downgrade range from $110 per illegal employee for to control illegal migration by eliminating
in the value of the shares of the company, paperwork violations to $16,000 per un- employment opportunity as a key incentive
exposure to fines and penalties, and (not documented worker. So, what can you do for unauthorized individuals to come to the
least of all) negative publicity. to make sure your company steers clear U.S. To accomplish this goal, all U.S. em-
Chipotle is not alone in this battle. Raids of any violations and avoids the worries of ployers are responsible for verifying, through
have reportedly resulted in the arrest and the dreaded ICE audit? a specific process, the identity and work au-
thorization or eligibility of all individuals, U.S.
HEALTH CARE REFORM citizens and non-citizens alike, hired after
November 6, 1986. The specific process is
Expert discusses health care reform law the proper completion of the Employment
implementation, expected developments Eligibility Verification Forms I-9 (Form I-9).
The Form I-9 has three sections. The first
section is entitled “Employee Information
On March 23, 2011, the Affordable Care year and also to preview what’s ahead, continued on next page
Act turned one year old. During that year, CCH, a Wolters Kluwer business, spoke
health reform kept many people busy. to Joanne Hustead, Senior Health Compli-
Group health plans with calendar-year ance Specialist at The Segal Company.
plans spent the second half of 2010 pre- CCH: What employer-related FLSA 27
paring to implement the Act’s numerous provisions of the health care reform Supreme Court defines “complaint”
provisions that took effect on January 1, law (the Affordable Care Act or the Social media 28
2011. The agencies responsible for health Act) take effect this year? Employer do’s and don’ts
reform issued a flurry of guidance to aid Hustead: Many new requirements ap- Employer retaliation 29
implementation, while the courts reviewed, ply to group health plans beginning with the It’s very risky business
and continue to review, various challenges plan year that starts on or after September
to the law. A new Congress is in place, and 23, 2010. For calendar-year plans, that
changes to the Act are being discussed. To means January 1, 2011. For plans that
review health reform’s journey over the past continued on page 30FORM I-9 ceptions: the U.S. passport and any docu- the Form I-9, or complete a new Form I-9
continued from front page ment from List B. Furthermore, employers to be attached to the original, no later than
cannot refuse to hire an individual because the date that the employment authorization
and Verification.” Employers must ensure that individual’s document has an expira- or the evidence of the authorization expires.
that Section 1 is completed by the employee tion date. For example, if an employee To reverify, an employee may present any
upon the date of hire (the first date of paid provides a work permit that expires in six currently valid document from List A or C.
work). Employers must ensure that Section months, the employer cannot terminate Employees are not required to present, for
1 is completed in full, including the signature that individual’s employment because of reverification purposes, a new version of the
section and the attestation. Although em- the limited duration of the permit. same document original presented. Verifi-
ployers are held responsible for deficiencies Employer review. Employers must cation is NOT required for U.S. passports or
in Section 1 (for example, if the information remember that the employee’s providing permanent “green cards.” Also, documents
is not complete), employers may not re- the required documentation does not end from List B do not need to be reverified.
quire employees to produce documents to the process for the employer. Instead, the Retention. Employers must retain
verify Section 1 information. If an employee employer or employer’s representative/agent the Form I-9 for either three (3) years from
refuses to sign Section 1 or attest to his or must personally review original documents the date of hire or for one (1) year after the
her status, the employer should not con- that demonstrate an employee’s identity and employment is terminated, whichever is
tinue to employ the individual. Furthermore, eligibility to work in the U.S. The employer later. An employer may, but is not required
an employee is not required to provide his must assure upon examination of the docu- to, copy a document presented by an
or her social security number in Section 1 ment that the document reasonably appears employee for the purpose of complying
unless the employer participates in E-verify, to be genuine and to relate to the employee. with the Form I-9. If such a copy is made, it
discussed in more detail below. The failure If the documents do not meet this standard, must be retained with the Form I-9. Copying
of an employee to provide a social security employers may reject the documents and and retaining such a document does not
number for the Form I-9 will not subject the ask employees for other documentation relieve the employer from the requirement
employer to penalties. that satisfies the Form I-9 requirements. to fully complete Section 2. Also, to avoid
The second section of the Form I-9 is Employees unable to present acceptable allegations of discriminatory treatment, if an
entitled “Employer Review and Verifica- documents should be terminated. Employ- employer copies documents for one em-
tion.” Section 2 requires the employer to list ers who choose to retain such employees ployee, it should do so for all employees.
the documents that were produced by the may be subject to penalties for improper
worker to verify his or her identity and em- completion of the form or for “knowingly What about E-Verify?
ployment eligibility. There are three groups continuing to employ” unauthorized work- Many employers have heard about a sys-
of documents the employee may use for ers. Sure signs of fraud are social security tem called “E-Verify,” but many don’t know
this purpose. The documents that can be numbers containing more than 9 digits, with enough about it to know whether it would
presented are listed on the reverse side of a number that begins with 000 or an 800 or continued on next page
the Form I-9. Which documents are to be 900 series, with middle digits of 00, or with
used is determined by the employee, not the the last four digits of 0000. Also, employers
employer. An employee can choose to either should note that, except when provided a
provide one document from List A (which certified copy of a birth certificate issued by
establishes both identity and work authoriza- a state, county, municipal authority or outly-
Managing Editor
tion) or he/she may provide one document ing possession of the U.S. bearing an official
Heidi J. Henson, J.D.
from List B (which establishes identity) and seal, photocopies are unacceptable.
Contributing Editors
one document from List C (which estab- Section Three of the Form I-9 pertains to
Sandra Stoll, J.D.
lishes work authorization). Likewise, the updating and reverification. Employers are Joy Waltemath, J.D.
employers may neither require nor accept required to reverify employment eligibility No claim is made to original government works; however, the
any more documentation than the minimum when an employee’s employment autho- gathering, compilation, and arrangement of such materials, the
historical, statutory and other notes and references, as well as
necessary to substantiate identity and work rization indicated in Section 1 or evidence commentary and materials in this Product or Publication are
eligibility. Section two must be completed of employment authorization recorded in subject to CCH’s copyright.
within three business days of the date em- Section 2 expires. An employer may also re- HUMAN RESOURCES MANAGEMENT—Ideas & Trends (USPS
ployment begins, unless the employee is verify (as opposed to completing a new I-9) 680-810)(ISSN 0745-0613), a CCH editorial staff publication, is
published monthly by CCH, a Wolters Kluwer Business, 4025
being employed for less than three days. In when an employee is rehired within three W. Peterson Ave., Chicago, Illinois 60646. Periodicals postage
that case, Section two must be completed (3) years of the date from which the Form paid at Chicago, Illinois, and at additional mailing offices.
POSTMASTER: SEND ADDRESS CHANGES TO HUMAN RE-
the first day employment begins. I-9 was originally completed and the work SOURCES MANAGEMENT—IDEAS & TRENDS, 4025 W. PETER-
What should an employer do with authorization or evidence of work authoriza- SON AVE., CHICAGO, IL 60646. Printed in U.S.A. ©2011 CCH.
All Rights Reserved.
expired documents? Documents that tion has expired. Employers must reverify
are expired must be rejected, with two ex- employment authorization on Section 3 of
©2011 CCH. All Rights Reserved.
26April 6, 2011
FORM I-9 What happens if you have done every- settlement, dismissal, or a Final Order for
continued from previous page thing required, but you still face the Chipotle civil money penalties. Once a Final Order is
Challenge of federal and/or state immigra- issued, the penalty is unappealable.
be a useful (or required) tool for them. First tion record requests, audits and on-site
of all, what is E-Verify? E-Verify is an Internet- inspections? U.S. Immigration and Customs So what does this all mean?
based system that compares information Enforcement (ICE) is authorized to conduct Basically, nothing can prevent the federal
from an employee’s Form I-9, to data from investigations to determine whether employ- or state government from requesting to
U.S. Department of Homeland Security and ers have violated the prohibitions against review your records or conducting audits
Social Security Administration records to knowingly employing unauthorized aliens and and on-site inspections. Instead, what
confirm employment eligibility. It was sup- failing to properly complete, present or retain is preventable is the employer’s receipt
posed to expire on September 30, 2009, the Form I-9. IRCA mandates that an ICE of a final order finding that the company
but was extended to September 30, 2012. administrative Form I-9 audit be preceded by knowingly employed unauthorized work-
While participation in E-Verify is voluntary the written Notice of Inspection (NOI), provid- ers. The way to prevent such a finding,
for most businesses, some companies ing for the IRCA-mandated 72-hour notice. and the crippling penalties that may ac-
may be required by state law or federal The NOI will indicate the date, time and place company such a finding, therefore, is to
regulation to use E-Verify. For example, that the ICE agent will arrive, and the docu- ensure that your employee are all properly
most employers in Arizona and Missis- mentation that the employer is requested to documented and authorized to work in the
sippi are required to use E-Verify. E-Verify is produce. ICE may also assert general powers United States. The only way to do this is
also mandatory for employers with federal to obtain personnel records that pertain to through proper completion and retention
contracts or subcontracts that contain the the hiring and employment of an individual of the Form I-9, or proper participation in
Federal Acquisition Regulation E-Verify employee. In the absence of the employer’s the E-verify program.
clause. If an employer elects to use the willingness to produce the personnel records,
E-Verify system, the employer may only ICE may issue an administrative subpoena Source: Article developed for CCH, a Wolt-
check E-Verify after job has been offered to obtain these materials. ers Kluwer company, by Tina M. Maiolo,
and accepted the Form I-9 completed. Em- After the audit, a Notice of Intent to Fine Esquire, a Member at Carr Maloney P.C.,
ployers may not use E-Verify on applicants (NIF) may result. When a NIF is issued, em- 2000 L Street Northwest Washington D.C.,
(i.e., pre-screening before hiring), and may ployers may request a hearing within 30 days DC 20036-4907; www.carrmaloney.com.
not use E-Verify selectively to verify some of its service. If a hearing is not requested
employees and not others. Also, to avoid within the 30-day period, ICE will issue a For more on the Form I-9, begin at
discrimination claims, an employer may only final order to cease and desist and to pay a ¶353 in the HR Practices Guide Ex-
check your employment eligibility in E-Verify civil money penalty. If a hearing is requested, planations. Additional information on
if hired for a new job and not if currently ICE will file a complaint to begin the admin- the E-Verify program can be found at ¶353A
working for him/her. If using E-Verify, the istrative hearing process which may end in in the HR Practices Guide Explanations.
employer must use it for all new employ-
ees participating hiring sites, regardless of FLSA
national origin or citizenship status.
If the employee information does not
match government records, the employer
Supreme Court defines “complaint”
will see a tentative nonconfirmation (TNC) in important FLSA case
response. If an employer received a TNC,
the employer must promptly give employee Oral complaints are protected under the which it was enacted compelled the con-
written notification of the TNC and ask FLSA's antiretaliation provisions, the U.S. clusion that oral complaints are protected.
the employee whether he or she wants to Supreme Court ruled March 22 in a 6-2 The Court vacated a Seventh Circuit deci-
contest it. If employee chooses to challenge opinion authored by Justice Breyer (Kasten sion that held a discharged employee did
TNC, both the employee and the employer v Saint-Gobain Performance Plastics, Dkt not engage in FLSA-protected conduct
must follow strict procedures. While the chal- No 09-834, March 22, 2011, Breyer, S). when he made a verbal complaint about
lenge is pending, the employer may not fire, Resolving a conflict among the circuits, the the location of the employer's time clocks,
suspend, delay first day on the job, withhold majority found the scope of the statutory which prevented employees from getting
pay or training, or limit employment. On the term "filed any complaint "found in FLSA, paid for time spent donning and doffing
other hand, if the employer receives notice Sec. 215(a)(3), encompasses oral as well protective gear — in violation of the Act.
of a final nonconfirmation result from E-Verify, as written complaints. The justices ruled Commenting on the decision, Attorney
or if the employee does not contest a tenta- that while the language of this particular Stacy Smiricky, Partner at the Chicago
tive nonconfirmation, the employer should section may be ambiguous in isolation, the office of Wildman, Harrold, Allen & Dixon
terminate the employment relationship. purpose of the FLSA and the content in continued on page 32
http://hr.cch.com
27SOCIAL MEDIA
Expert lists social media do’s and don’ts for employers
Often reported on are the do’s and don’ts (i) Be sure to identify a specific contact that the only people who don’t know
employees should follow when using social person (with contact information) who about policy violations are those that
media tools such as Facebook and Twitter; will be the point person for employees’ are charged with its enforcement.
do maintain professionalism, don’t violate questions about the policy and make it 2. Do educate employees. The goal
company trade secrets, etc. Equally as im- clear that employees are to ask before of a social-media policy is not to “trick”
portant are the do’s and don’ts employers acting any time they have any doubts employees into violating it. Instead, the
should consider when developing workplace about whether their intended action objective is to prevent employees from act-
rules and regulations for social media use. may violate the policy. ing in a way that hurts the organization or
Molly DiBianca, an associate attorney at (ii) Specifically reference other company themselves. With that in mind, employers
Young, Conaway, Stagatt and Taylor, LLP, policies, such as an anti-harassment are well advised to offer ongoing education
lists several important tips for employers: and anti-discrimination policy, conflicts- to employees. Topics can include proper
1. Do have a well-written policy. of-interest policy, and confidentiality online etiquette, good online citizenship,
A social-media policy that is carefully policy, and make it clear that they apply as well as more hands-on subjects, such
drafted can be the most effective tool that equally to conduct in the online world as how to adjust the privacy settings in a
an employer can hope to have. Although just as they do in the “real” workplace. social-networking profile.
policies can vary greatly depending on (iii) Require all employees to report online And don’t rule out the value of learning
the culture and needs of the organization, conduct that violates any of these poli- by example. A discussion of headlines in-
there are a few essentials that all policies cies as soon as they become aware of volving employees who are terminated or
should include: it — without this provision, you may find disciplined for online conduct is an excellent
training tool and offers employers valuable
insight about what conduct their employees
Can employers test workers find most (and least) egregious.
3. Don’t take it personally. When
to see if they lie? an employee makes negative comments
about her job, her employer, or her su-
Issue: There has been a theft of equipment from your company’s pervisor, employers often overreact. They
warehouse. In conducting the investigation into the theft, can you re- tend to take the comments personally and
quire employees to take a lie-detector test? respond with emotion instead of logic. If
you discover an online post about your or-
Answer: Yes. While the Employee Polygraph Protection Act of 1988 ganization written by an employee, it’s best
(EPPA) prohibits most private employers from using lie-detector tests, to take a step back before you respond.
either for pre employment screening or during the course of employ- Ask yourself whether the post really im-
ment, the Act also includes limited exemptions where polygraph pacts the organization in a negative way or
tests (but no other lie-detector tests) may be administered in the private sector, whether it’s more akin to traditional water-
subject to certain restrictions. One such exemption allows the administration cooler gossip. Unless you can identify
of polygraph tests to employees who are reasonably suspected of involvement some kind of actual harm to the organiza-
in a workplace incident that results in economic loss to the employer and who tion, you may want to consider whether
had access to the property that is the subject of an investigation. disciplinary action is appropriate at all.
Under the exemption for ongoing investigations of workplace incidents in- 4. Don’t be sneaky. “Sneaky” con-
volving economic loss, a written or verbal statement must be provided to the duct frequently gets employers into trouble.
employee prior to the polygraph test. The statement must explain the specific Don’t, for example, ever ask (or require) an
incident or activity being investigated and the basis for the employer’s reason- employee or applicant to give you his pass-
able suspicion that the employee was involved in such incident or activity. word to an online account or profile. Simi-
When polygraph examinations are allowed, they are subject to strict stan- larly, don’t have another employee give you
dards for the conduct of the test, including the pretesting, testing, and post access to her account so you can surrepti-
testing phases. An examiner must be licensed and bonded or have professional tiously snoop on her coworker. Don’t have
liability coverage. In addition, the Act strictly limits the disclosure of information someone send a friend request so you can
obtained during a polygraph test. gain access to an employee or applicant’s
Source:.29 USC §2001 et seq; 29 CFR Part 801. profile without disclosing the real reason
continued on next page
©2011 CCH. All Rights Reserved.
28April 6, 2011
RETALIATION
Retaliating against employees can be very risky business
As a matter of common sense, retaliat- associated with that person, Hendrickson suffered an adverse employment action
ing against employees for engaging in observed. Indeed, in January, the Su- in support of their retaliation claims. The
protected activity is pretty risky business. preme Court held that an employee who court stressed that an adverse employ-
Yet, EEOC regional attorney John Hen- was fired shortly after his fiancée filed an ment action “need not be tangible.” (EEOC
drickson wonders whether legal counsel EEOC charge against their employer had v Chrysler Group, LLC, EDWis, February
have neglected to tell employers just how standing to file a Title VII retaliation lawsuit 17, 2011).
dangerous retaliation is — and it’s so easy (Thompson v North Am Stainless, USSCt, Here, the manager allegedly was
to avoid, he chides. January 24, 2011). screaming and pounding his fists on the
Speaking to attendees at the Chicago table while threatening termination, the
Bar Association’s annual labor and employ- “While initial charges court noted, and threw a notepad at a
ment law update last month, Hendrickson complainant demanding that she write
said that EEOC charge traffic is “through of employment a statement confirming that she was not
the roof” with the down economy. In fiscal discrimination are accusing the supervisor of sex discrimina-
year 2010, 99,922 charges were filed, tion. “This scenario paints a much more
with retaliation charges up dramatically unlikely to result in hostile and intimidating atmosphere than
— 36,358 such charges filed last year — an unfavorable EEOC if [the manager] delivered his message in
amazingly outpacing the number of race a normal tone of voice.” Further, a trier of
discrimination charges that were filed. For finding, retaliation fact could find the warnings of possible
the first time in the agency’s 45-year his- claims face less of a termination constituted anticipatory retali-
tory, retaliation charges were more numer- ation, a materially adverse action. Because
ous than any other. hurdle in court — it’s the employer’s conduct, if true, may be
While Hendrickson noted several in- just not worth the risk enough to dissuade a reasonable worker
teresting developments, such as the 400 from making a charge of discrimination,
EEOC systemic discrimination investiga- of employer liability.” and because a reasonable finder of fact
tions now underway nationwide and that could infer the requisite causation to sup-
the use of conviction and credit records Temporal proximity may be port a claim of retaliation, material issues of
as employment selection tools are on the enough. Earlier this month, the Seventh fact precluded summary judgment.
agency’s radar, he advised that the major Circuit said that a trial court’s belief that tim- continued on next page
developments last year were in the area ing was not enough to support an inference
of retaliation. of causation was untenable, determining
Risky business. When a charge of that in this case, the jury should make SOCIAL MEDIA
discrimination has been filed, there is a very that determination. In concluding that the continued from previous page
small chance that the EEOC will find reason lower court had erred in granting summary
to believe a violation has occurred — 10 judgment for the employer, the court also for the request. The bottom line here is, if
percent or less, according to Hendrickson. noted that one of the employer’s shifting it sounds sneaky, looks sneaky, or smells
Given those low odds and recent case explanations for discharging the employee sneaky, then a jury will hold you accountable
law on reprisal claims, which Hendrickson - that he was fired for photographing the for such unpalatable behavior.
characterizes as favoring employees, it’s workplace (which he was doing to show
hard to fathom why employers continue the EEOC or a court how his workstation Source: “Social Media Dos and Don’ts
to risk retaliatory conduct that may spawn was set up) came close to admitting retali- for Employers,” published in the Delaware
a new charge more likely to succeed than ation (Loudermilk v Best Pallet Co, 7thCir, Employment Law Blog on March 17, 2011,
an original charge that was unlikely to move February 18, 2011). by Molly DiBianca, an associate attorney in
forward. And, recapping developments Screaming, pounding and threats. the Wilmington, Delaware office of Young,
over the last year, Hendrickson observed Also significant was a Wisconsin dis- Conaway, Stargatt and Taylor, LLP; www.
that the standard as to what constitutes trict court’s rejection of an employer’s delawareemploymentlawblog.com.
retaliation is getting looser. contention that because the employees
Associational reprisal claims. who brought retaliation claims were not For more on social media use in the
You no longer have to be the person who discharged, nor did they experience any workplace, including sample work-
engaged in the protected activity to bring other tangible loss in pay, benefits, or po- place policies, see ¶2428 and ¶2429
a claim of retaliation, so long as you are sition, the EEOC could not establish they in the HR Practices Guide Explanations.
http://hr.cch.com
29HEALTH CARE REFORM medical claims or quality improvement as Hustead: The most complicated provi-
continued from front page opposed to administrative costs and over- sions to implement are two of the require-
head (called the medical loss ratio). In the ments that apply only to non-grandfathered
do not operate on a calendar-year basis large group market, insurers must spend plans: the preventive services requirement
(e.g., July 1 - June 30 plan year), these new 85 percent of premiums on medical claims and the new external review requirement.
requirements will take effect at the start of (80 percent in the small group market). Determining precisely what preventive
the plan year that begins in 2011. Insurers that do not meet these targets services must be provided is complicated
Which specific requirements apply to a have to provide premium rebates. and requires help from plan administrators
group heath plan depends on whether the CCH: What do employers need to or insurers. Internal and external review re-
plan is “grandfathered.” A grandfathered do to comply with these provisions? quirements can also be more onerous than
plan is one that was in effect on March 23, Hustead: For calendar-year plans, previous procedures. Finally, employers
2010, with a plan design that has stayed much of the hard work was completed who are grandfathered need to evaluate all
largely the same since then. in 2010, before the start of the plan year. potential plan changes to assure that they
All group health plans must continue This included: can keep that status.
coverage for adult children up to age 26, Making key decisions (e.g., whether to CCH: How is health care reform
eliminate lifetime dollar limits, comply with change the types of dependent children affecting employees so far?
restrictions on annual dollar limits, stop eligible for coverage, convert the plan’s Hustead: Employees who were able
terminating coverage retroactively (with lifetime dollar limit to an annual dollar to add adult children back onto their group
limited exceptions) and stop applying pre- limit, apply for a waiver of the annual plan probably saw the most direct and im-
existing condition exclusions to children limits rules and keep the plan’s grand- mediate benefit, particularly if this coverage
under age 19. For calendar-year group fathered status); did not cost them extra because they al-
health plans, these requirements took ef- Providing special enrollment for adult ready had family coverage. Those enrolled
fect on January 1, 2011. children and for individuals who had lost in non-grandfathered plans should be see-
Group health plans that have lost their coverage or benefits due to operation of ing enhancements to their plan’s preventive
grandfathered status must comply with a now-prohibited lifetime dollar limit; coverage. Of course, enhanced benefits
these additional requirements: required Informing participants of plan changes in can mean increased costs, some of which
coverage of an extensive list of preventive connection with open enrollment; and may be passed on to employees.
services (without imposing cost sharing Revising plan documents, Section 125 CCH: Did any of the agencies’
when provided in network), revised inter- cafeteria plan documents and open health reform guidance that has
nal claims rules plus new binding external enrollment materials and forms. been issued so far surprise or dis-
review of coverage determinations, new Plans that do not operate on a calendar- appoint you? If so, which guidance
rules applicable to emergency services year basis need to complete this work and why?
provided in hospital emergency rooms this year. Hustead: The agencies have issued
and new patient protection rules relating to The Internal Revenue Service (IRS) several interim final regulations and other
choice of primary care providers and direct gave plan sponsors extra time in 2011 to forms of guidance including several sets of
access to ob-gyn services. adopt amendments to their Section 125 continued on next page
New tax requirements relating to over- cafeteria plans to comply with the new
the-counter (OTC) medicines and drugs OTC rules. Plan sponsors have until June
took effect for OTC medicines and drugs 30, 2011 to make any necessary amend- RETALIATION
(other than insulin) purchased on or after ments to these documents to reflect the continued from previous page
January 1, 2011. Group health plans may new prescription requirement.
not pay for such OTC medicines and Plan sponsors that sought and ob- An ounce of prevention. As Hen-
drugs unless the patient presents a valid tained a waiver of the new annual limits drickson points out, awareness of employee
prescription. These new rules also apply rules will need to provide participants protections against retaliation will grow
to account-based plans such as Flexible with a notice explaining that the govern- — and the case law has tipped toward
Spending Arrangements (FSAs), Health ment granted a one-year waiver of the protecting employees. While initial charges
Reimbursement Arrangements (HRAs) and new rules. Plan sponsors will also need of employment discrimination are unlikely to
Health Savings Accounts (HSAs). These to apply again, later this year, to continue result in an unfavorable EEOC finding, retali-
rules apply to all plans, regardless of plan the waiver into next year. Applications are ation claims face less of a hurdle in court
year or grandfathered status. due no later than 30 days before the start — it’s just not worth the risk of employer
Another new requirement affecting only of the next plan year. liability. Training supervisors and managers
insured group health plans took effect on CCH: What provisions are cur- to refrain from retaliatory conduct following a
January 1, 2011. This is the requirement rently causing or expected to cause complaint of discrimination would be a wise
that insurers spend a set percentage on problems for employers? and timely business investment.
©2011 CCH. All Rights Reserved.
30April 6, 2011
HEALTH CARE REFORM Essential Health Benefi ts: This needed for approval. President Obama has
continued from previous page fall the U.S. Department of Health and said he would veto repeal legislation if it
Human Services (HHS) may issue a should reach the White House.
answers to Frequently Asked Questions. proposed rule defining the term “es- One effort targeting a specific section of
That said, we were surprised by the ap- sential health benefits.” This concept the law has gained traction: repeal of the
proach taken in the grandfathering regula- is important to health insurance issu- Act’s expansion of an existing tax-reporting
tions issued in June 2010. The grandfather- ers because they must provide these provision involving the Form 1099. On
ing regulations leave very little room for plan benefits in coverage offered through February 2, 1011, by a large margin, the
changes before a group health plan loses the state-based Exchanges beginning Senate approved legislation repealing the
its status as a grandfathered plan. in 2014. In the short term, its primary revisions made by the Act to this reporting
For example, any increase in the significance to employer-sponsored requirement. Legislation targeting other
percentage of coinsurance paid by par- plans is in the context of lifetime and provisions will likely be debated in the
ticipants results in loss of grandfathered annual dollar limits, as the Act prohibits coming weeks and months.
status, no matter how small. Initially, plan (lifetime) or restricts (annual) dollar limits Congress is also expected to attempt
sponsors could not enter into new insur- on essential health benefits. to affect implementation of the Act by re-
ance contracts without the plan losing The IRS may also issue guidance this stricting how certain federal agencies use
grandfathered status, but the agencies year on the new nondiscrimination require- appropriated funds. This will likely happen
changed their approach to that issue in an ments applicable to insured group health as appropriations bills (spending bills) move
amendment released in November 2010. plans, which prevent discrimination in through Congress.
The bottom line is that it is difficult for plans favor of highly compensated employees. Finally, there may be a technical cor-
to remain grandfathered. Once a plan loses Although these requirements apply to rections bill moving through Congress
its status as a grandfathered plan, it must non-grandfathered plans with the plan year this year — a bill that would fix perceived
comply with additional requirements. beginning on or after September 23, 2010, drafting errors in the law, but not undo or
CCH: What guidance do you expect group health plans will not be required to revise major sections.
the agencies to issue this year? comply until guidance is issued. CCH: How do you expect the
Hustead: The three most significant Other guidance expected this year pending judicial proceedings re-
pieces of new guidance expected this includes guidance for the states on the fed- lated to health care reform to go?
year with direct, short-term implications for eral rules that will govern the Exchanges, Hustead: Litigation challenging the
employer-sponsored plans are: as well as guidance on the Consumer Act continues to move through various
Uniform Disclosure: The Act re- Operated and Oriented Plans (CO-OP) courts around the country. So far, two
quires the agencies to develop stan- Program. The latter aims to foster the cre- federal district courts (in Virginia and
dards for uniform plan disclosures no ation of nonprofit health insurance issuers Florida) have declared the individual man-
later than March 23, 2011 (12 months that will offer benefit plans in the individual date unconstitutional, and two (in Virginia
after enactment). This short four-page and small group markets. and Michigan) have upheld it. The district
summary must describe, in a culturally Finally, all of the regulations released court in Florida invalidated the entire law
and linguistically appropriate manner, in 2010 as interim final regulations (e.g., because it concluded that the individual
the plan’s benefits, exclusions or limits continuing dependent coverage to age 26) mandate was not severable from the rest
and cost-sharing provisions. Group need to be finalized. The agencies could of the Act. It is likely that these legal issues
health plan sponsors and health insur- issue these in final form this year. will continue to be reviewed in the courts
ance issuers must provide these sum- CCH: How will the new Congress for some time, as cases are appealed
maries to plan participants by March affect the health care reform laws? and work their way up to the Supreme
23, 2012. The Act will also require plan Hustead: Repeal of the Affordable Court, which will ultimately decide the
sponsors to notify participants of any Care Act is not likely, but there are likely fate of the law.
material modification to plan terms no to be targeted efforts to change or undo
later than 60 days prior to the effective specific provisions of the law or affect its Source: Joanne L. Hustead is a senior health
date of the modifications. implementation. compliance specialist in the Washington, DC
W-2 Reporting: The Act requires On January 19, 2011, the House of office of The Segal Company. She special-
employers to report the aggregate cost Representatives passed H.R. 2, the “Re- izes in research and analysis of federal laws
of employer-sponsored health coverage pealing the Job-Killing Health Care Law and regulations that have an impact on
on their employees’ W-2 forms. The Act.” This short bill would repeal the entire health benefit plans. She can be reached at
IRS delayed the effective date of this Act. On February 2, 2011, the Senate 202.833.6451 or jhustead@segalco.com.
requirement so that it now applies to voted on the House-passed bill during This interview was originally published in the
coverage provided during 2012 (rather debate on a transportation bill, but H.R. 2’s February 22, 2011 issue (No. 486) of CCH’s
than 2011). supporters fell short of gaining the 60 votes Employee Benefits Management Directions.
http://hr.cch.com
31PERIODICALS POSTAGE
CCH, a Wolters Kluwer business PAID
AT CHICAGO, ILLINOIS
4025 West Peterson Avenue Chicago, Illinois 60646-6085 AND AT ADDITIONAL
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Consumer prices increase 0.5 percent in February SUPREME COURT DECISION
continued from page 27
The Consumer Price Index for All Urban Consumers
(CPI-U) increased 0.5 percent in February on a season- LLP and member of CCH’s Employment
ally adjusted basis, the Bureau of Labor Statistics (BLS) of the US Department of Law Daily Advisory Board, notes that the
Labor reported March 17. Over the last 12 months, the all items index increased 2.1 majority's broad reading of the phrase "filed
percent before seasonal adjustment. any complaint" is not surprising. Further,
Though the seasonally adjusted increase in the all items index was broad- the decision is similar to other employment-
based, the energy index was once again the largest contributor. The gasoline related statutes under which employees'
index continued to rise, and the index for household energy turned up in Febru- rights and employers' obligations are
ary with all of its components posting increases. Food indexes also continued triggered by non-written complaints. "The
to rise in February, with sharp increases in the indexes for fresh vegetables and employer community can only hope that
meats contributing to a 0.8 percent increase in the food at home index, the larg- common sense will guide the extent to
est since July 2008. which Kasten may be deemed applicable
The index for all items less food and energy rose in February as well. Most of its in future cases to oral complaints such as
major components posted increases, including the indexes for shelter, new vehicles, 'the time clock is in such an inconvenient
medical care, and airline fares. The apparel index was one of the few to decline. place that we ought to be paid for walking
to and from it.' Such complaints could
Jobless rate falls to 8.9 percent in February impose additional burdens on employers to
Nonfarm payroll employment increased by 192,000 in February, and the unemploy- investigate every employee gripe. Cautious
ment rate was little changed at 8.9 percent, the BLS reported March 4. Since a employers will do so," Smiricky stated.
recent low in February 2010, total payroll employment has grown by 1.3 million, or While the majority emphasizes that an
an average of 106,000 per month. employee's non-written complaint must be
The jobless rate was down by 0.9 percentage point since November 2010 with sufficiently clear and detailed for a reasonable
gains in manufacturing employment (+33,000), construction employment (+33,000), employer to understand it as an assertion of
professional and business services (+47,000), employment services (+29,000), health rights, the very nature of such oral com-
care (+34,000), and transportation and warehousing (+22,000). Employment in both plaints invites fact disputes: exactly what do
state and local government edged down over the month with local government losing the employer and employee each say was
377,000 jobs since its peak in September 2008. the content and context of the employee's
oral complaint about the unpaid time? Such
Mass layoff events, associated initial claims both down in February fact disputes may decrease employers'
Employers took 1,421 mass layoff actions in February involving 130,818 workers, ability to resolve such cases on summary
seasonally adjusted, as measured by new filings for unemployment insurance benefits judgment. As such, Smiricky recommends
during the month, the BLS reported March 22. Each mass layoff involved at least 50 that employers train their supervisors and
workers from a single employer. The number of mass layoff events in February de- managers to be aware of these types of non-
creased by 113 from January, and the number of associated initial claims decreased written complaints, report them immediately
by 18,981. In February, 291 mass layoff events were reported in the manufacturing to the person responsible for investigating
sector, seasonally adjusted, resulting in 26,060 initial claims. Both figures decreased those complaints, and thoroughly document
over the month, with manufacturing initial claims reaching its lowest level in program both the oral complaint and the company's
history (data begin in April 1995). investigation of it.
©2011 CCH. All Rights Reserved.
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