Is Your Company A "Large Employer" Subject to "Obamacare" -- Understanding the 50 full-time Equivalent Threshold

It has been well-publicized that, beginning in January 2013, employers with more than 50 full-time employees will be required to comply with "Obamacare" by either providing insurance benefits for their employees or paying a penalty.   There has been much speculation for example that the American economy will begin to resemble France, in which an inordinate number of employers stop hiring at exactly 49 employees to avoid the regulations that kick in at 50 employees. 

But if any employer wishes to follow this "49'er" strategy it needs to understand that Obamacare's definition of a "large employer" subject to coverage is actually based on a special definition of "full-time equivalent" employees.  In essence, the new law aggregates all part-time hours worked and treats 120 monthly part-time hours worked by any number of individuals as equivalent to one full-time employee.  For example, as explained by a report of the Congressional Research Service 

"Full-time employees” are those working 30 or more hours per week.  The number of full-time employees excludes those full-time seasonal employees who work for less than 120 days during the year.  [However] The hours worked by part-time employees (i.e., those working less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis, by taking their total number of monthly hours worked divided by 120.

Employers may also be tempted to avoid application of the statute by obtaining services from independent contractors rather than employees.  In California, however, employer must be very careful to avoid the penalties and liabilities that can result from misclassifying employees as independent contractors.

Can Employers Conduct Surveillance On Employees Taking FMLA Leave?

I expect that many more employers will be asking their employment counsel if they can conduct surveillance on employees who they expect are lying about their health status given today’s economy and the new FMLA regulations.  

There have been a few courts that have addressed this issue. As one court in Colburn v. Parker Hannifin (1st Cir., 2005) noted that the FMLA prohibits employers from taking certain actions against employees:

In addition to the grant of substantive rights, the statute sets forth a list of prohibited acts at 29 U.S.C. § 2615:

(a) Interference with rights

(1) Exercise of rights
It shall be unlawful for any employer to interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under this subchapter.

(2) Discrimination
It shall be unlawful for any employer to discharge or in any other manner discriminate against any individual for opposing any practice made unlawful by this subchapter.

(b) Interference with proceedings or inquiries
It shall be unlawful for any person to discharge or in any other manner discriminate against any individual because such individual -- (1) has filed any charge, or has instituted or caused to be instituted any proceeding, under or related to this subchapter; (2) has given, or is about to give, any information in connection with any inquiry or proceeding relating to any right provided under this subchapter; or
(3) has testified, or is about to testify, in any inquiry or proceeding relating to any right provided under this subchapter.

The court in that case concluded that the statute prohibits “both interference and discrimination.” This is the key issue – whether the employer’s conduct interferes with the employee’s protected leave. In Colburn, the employee claimed to be too dizzy to drive to work, but was caught working out at the gym while on leave. There the court found that the employer’s surveillance did not violate the FMLA.

Courts in the Seventh and Sixth Circuits have also held that employers may conduct surveillance of employees suspected of abusing their FMLA leave.

Does this mean that employers can always conduct surveillance on their employees? No. Employers need to be sure the surveillance does not go too far and invade the employee’s privacy, or the employee’s family members’ privacy.  A court's analysis will be whether the investigation interferes with the employee's FMLA leave.  But as many of these cases point out, if an employee travels on the plane (Crouch v. Whirlpool (7th Cir. 2006)), or works for husband’s business mowing lawns (Vail v. Raybestos (7th Cir. 2008), then these activities conducted in the public possibly could be monitored by an employer.

Employers Face a High Burden to Accommodate Returning Employees: Nadaf- Rahrov v. Neiman Marcus Group, Inc.

On September 10, the First District Court of Appeal issued what I believe is the very important disability discrimination case of Nadaf- Rahrov v. Neiman Marcus Group, Inc.  The decision is important not because it alters pre-existing disability law, but because it applies the law to the most common scenarios and real-life issues faced by employers and employees.  

The case involved a clothes fitter at Neiman Marcus who had gone out on a medical leave because she was "unable to work" according to a doctor's note.  When her leave expired and she did not submit a release to return to work she was terminated.  The trial court initially granted summary judgment to Neiman Marcus on the grounds that the plaintiff was still unable to perform the "essential duties" of her job.

The appellate court reversed, however, on the ground that Neiman Marcus had not done enough to investigate the plaintiff's actual condition or to explore potential alternate positions.  The Court noted that the employer does not have to offer a substitute job that would constitute a "promotion."   But otherwise, the appellate decision merely illustrated how exhaustive the employer's efforts must be if it expects to avoid legal liability.  For example:

  • The employer cannot avoid looking at alternate positions merely because a doctor's note states that the employee is "unable to work."  This language can be interpreted to mean that the employee is only unable to perform her original job, and may not apply to all potential substitute jobs.  
  • The employer must consider all vacant positions that the worker could perform.  For example, clerical jobs must be considered for employees who formerly performed only physical duties.
  • The employer must consider positions that are not yet vacant.  In other words, extending the employee's leave until a new position opens up is part of the "reasonable accommodation."
  • The employer must consider vacant positions at other facilities and locations.  If the employee signals a willingness to relocate, this may conceivably require a nationwide search for vacant positions that the employee could perform.

Satisfying this type of internal job search may not be easy or convenient but it is imperative to avoid liability under the ADA or the FEHA.  The lesson for employers is to never assume anything about the employee's condition or the nature of substitute positions without a specific, diligent investigation.         


California Enacts Military Spouse Leave Law (Effective Immediately)

Governor Schwarzenegger recently signed California Assembly Bill (AB) 392 into law. That bill creates a new leave of absence right for spouses of military personnel while those personnel are on a leave of absence from deployment.

Specifically, the military spouse law provides that:
  • Employers with 25 or more employees in the United States to allow eligible employees to take up to 10-days off from work, on an unpaid basis, when his/her spouse is on leave from deployment during a period of military conflict;
  • Eligible employees are defined as employees who work at least an average of 20 hours per week and whose spouse is a member of the United States Armed Forces, National Guard, or Army Reserve on active duty in an area of military conflict;
  • Employees must provide notice to the employer within 2 business days of receiving official notice that his/her spouse will be on a leave from deployment.
It is important to note that it does not appear there are any circumstances under which an employer would be permitted to deny an employee's leave request. Accordingly, employers should be extremely careful in dealing with requests for leave under this new law.

Three Family Leave Bills Vetoed By Governor

California employers should breath a sigh of relief as Governor Schwarzenegger vetoed three bills that provided for expanded leave rights under California law. 

Two of the bills vetoed by the Governor - AB537 and SB727 - proposed to expanded both the unpaid and paid leave programs to include care for a sibling, mother- or father-in-law, grandparent or grandchild.

The third bill vetoed, SB836 (previously discussed here), would have prohibited employment discrimination on the basis of family responsibilities such as caring for a sick relative.

Schwarzenegger said the bills would have increased confusion about leave requirements, confusion that already results in many lawsuits:
California has the strongest employment leave and workplace protection laws in the country...While these laws have been enacted with the best of intentions, they have also caused much confusion.... Instead of expanding the confusing network of laws that presently exist, employers and employees should be working together to eliminate confusion and create a system of workplace laws that ... offers both employers and employees flexibility to meet their respective needs.

Bills In California State Legislature Expanding Employee Leave Rights

Assemblymember Sandré Swanson posted an article recently on the California Progress Report discussing a few new bills currently being considered by the state legislature.  These bills should be of particular importance to California employers, as Assemblymember Swanson notes:

My bill, AB 537, will directly impact the ability of family members to care for their loved ones. This bill will add seriously ill "grandparents," "grandchildren," "parents-in-law," "siblings," and “domestic partners” to the list of family members that an employee can take job-protected, unpaid leave to care for under the California Family Rights Act (CFRA). It will also ensure that employees can take leave to care for their seriously ill independent, adult children.
He also mentions related bills making their way through the California legislature:
I am also pleased to be supporting two of Senator Sheila Kuehl’s (D – Santa Monica) bills.

The first bill, SB 727, expands paid family leave to cover the same family ties as my bill, AB 537. SB 836 expands the Fair Employment and Housing Act (FEHA) to prohibit discrimination against employees who care for their families by adding “familial status” to the list of prohibited bases for employment discrimination. SB 836 will especially protect mothers from being discriminated against at work. For example, research shows that mothers are often paid less and are less likely to be hired than non-mothers with the same qualifications. The bill also protects fathers and male employees who are often penalized at work when they seek to take an active role in caring for their children or other family members. In addition, SB 836 recognizes the diverse families and family care giving arrangements of California’s workforce. Studies show that families of color are most likely to be caring for elder relatives.
You may contact Assemblymember Swanson via email by clicking here and Senator Sheila Kuehl via email by clicking here

Employer Created Liability - When None Exists

Diane Pfadenhauer at Strategic HR Lawyer has an excellent post about the recent Sixth Circuit case Thomas v. Miller. The court in Thomas held that even though an employer may have less than 20 employees, it may be subject to COBRA requirements if the employer has used “conduct or language amounting to a representation” that an employee is entitled to COBRA benefits. Diane reminds employers to carefully draft their policies to ensure that the policy does not apply to employee who may otherwise be exempt from the law at issue.

I see this occur often in regards to California specific laws. For example, California Labor Code section 230 provides certain protections to victims of domestic violence or sexual assault. Employers cannot discriminate against employees who must take time off to seek a temporary restraining order or other injunctive relief to ensure the health or safety of the employee and/or his or her child. If an employer has 25 or more employees, however, the employer is prohibited from discharging, discriminating, or retaliating against an employee who is a victim of domestic violence or sexual assault and who takes time off to seek medical attention and a list of other services. Often times small employers assume this second requirement pertains to them and incorporate it into their policies without noticing that they are not covered by this law.

Unintended Consequences Of Paid Leave Mandates

There is a great article in today's Wall Street Journal (subscription required) that tries to bring some common sense into the discussion about the current trend by states to require employers to provide paid family leave.  Here's an excerpt from the article:
The political logic seems to be that government must require this benefit because employers are too greedy and heartless to do so on their own. Here's the reality: All forms of paid leave already cost employers an average of $1.76 an hour per full-time employee, or 6.8% of total compensation, according to the Labor Department. Companies don't want disgruntled employees and thus tend to offer benefits that are competitive with their industry and consistent with profitability. Today 85% of employers with 20 or more workers provide tuition assistance, 45% offer adoption assistance, 74% paid sick leave, 57% flex time, and 77% paid vacations.
The article explains that there is a cost associated with requiring employers to provide even more generous paid leave - fewer jobs and a higher unemployment rate.

DOL On-Line Self Assessment For Restaurateurs Employing Minors

The U. S. Department of Labor’s Wage and Hour Division website provides a self assessment tool for restaurants that employ minors. The assessment covers common violations of the Fair Labor Standards Act (FLSA ). Restaurant owners should note that this assessment does not cover California state law items. The assessment covers items that the DOL found in the past to be some of the most common problems encountered in restaurants, and therefore, are likely issues a DOL investigator will look for in a restaurant.

Here is a list of a few of the items covered in the assessment:

Do any workers under 18 years of age do the following:
1. Operate or clean power-driven meat slicers or other meat processing machines?

2. Operate or clean any power-driven dough mixer or other bakery machines?

3. Operate, load, or unload scrap papers baler or paper box compactors?

4. Drive a motor-vehicle on the job?

Do any workers under 16 years of age do the following:
5. Cook?

6. Bake?

7. Clean cooking equipment or handle hot oil or grease?

8. Load or unload goods from a truck or conveyor?

9. Work inside a freezer or meat cooler?

10. Operate power-driven bread slicers or bagel slicers?

11. Operate any power-driven equipment?

12. Work from ladders?

13. Work during school hours?

14. Work before 7:00 a.m. on any day?

15. Work past 7:00 p.m. between Labor Day and June 1?

16. Work past 9:00 p.m. between June 1 and Labor Day?

17. Work more than 3 hours on a school day, including Fridays?

18. Work more than 8 hours on any day?

19. Work more than 18 hours in any week when school was in session?

20. Work more than 40 hours in any week when school was not in session?

21. Do you employ any workers who are less than 14 years of age?

22. Do you fail to maintain in your records a date of birth for every employee under 19 years of age?

Click here to take the entire assessment. At the end of the assessment, there is a rules summary that explains an employer’s responsibility under the FLSA for the issues on the assessment.