Tag Archives: Department of Labor

WIPP Works in Washington – August 2018

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Pay No Attention to that Man Behind the Curtain

Ann Sullivan, WIPP Chief Advocate

In the final scene of the Wizard of Oz, the dog Toto pulls back the curtain and Dorothy discovers the man behind the curtain is not the great and powerful Wizard, he’s just a little old man with a megaphone. Sometimes, actions in Washington use the megaphone but there is relatively little “behind the curtain.” That’s how the new rule on Association Health Plans (AHPs), issued by the Department of Labor, feels.

It was with great fanfare that the Administration issued new rules for AHPs. WIPP has supported AHPs since its inception as a necessary tool to allow small businesses to band together to create larger health insurance pools, thus creating more competition and better prices in the small business marketplace. Insurance rules adopted during the Affordable Care Act (aka Obamacare) largely prohibited AHPs from a viable option. Because every insurance plan had to cover 10 “essential health benefits” under the ACA, these plans became mute.

When the Department of Labor announced loosening the regulations to allow AHPs, we applauded. WIPP submitted comments urging better pooling mechanisms, a wider range of health plan options and protections for those with pre-existing conditions. We also urged the Department to include a different “commonality of interest” definition, allowing small businesses to band together beyond a trade, industry, or profession. This would have allowed small business organizations to offer AHP membership to its members, including WIPP.

On June 21, the man behind the curtain showed up. The Department of Labor issued its new AHP rules. By deciding to keep the definition of who can join an AHP to a trade, industry, or profession, business organizations like WIPP, cannot offer an AHP. For example, an accountant in Nevada could join an AHP housed in a national association of accountants, but an organization of women business owners, does not qualify as a trade, industry, or profession, according to the new rules. The AHP can have out-of-state members but must comply with the rules of the state in which it is housed, restricting its ability to be a true “across state lines” option. Important to note is that AHPs are not required to offer the 10 essential benefits, which means education for employers and employees who join AHPs is needed.

News reports suggested that small business associations who have supported AHPs in their policy platforms are not going to take advantage of the new rules. That’s because they can’t—their commonality is business owners, not limited to a specific trade, industry or profession. Giving small business owners more health insurance options continues to be part of our policy platform. As premiums continue to rise, small business exchanges set up by the ACA should not be the only option. The Department of Labor could have done so much more than use their megaphone.

Administration Eases Restrictions on Association Health Plans

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Due to a move by the Trump Administration, the Department of Labor released the final version of its Association Health Plan rule, which allows industries and small businesses to band together via bona fide associations to buy insurance as part of a plan to encourage competition in health insurance markets and lower the cost of coverage. AHPs will be an important part of employer options for coverage beginning in 2019.

The Association Health Plan (AHP) rule broadens the definition of an employer under ERISA, the Employee Retirement Income Security Act, to allow more groups to form association health plans across state lines, similar to large employers. Key provisions in the final AHP rule include:

  • Expansion of definition of those that can form an Association Health Plan (AHP) – An association that represents a single trade, specific industry or profession can now establish an AHP that provides coverage to their members across the entire country, like a large employer plan. General business organizations and workers, or business owners in unrelated professions can band together to obtain coverage through an association health plan, but they must be in the same geographic region. While this allows for a breadth of types of AHPs – national, statewide or local – by restricting criteria of commonality to establish AHPs across state lines, many existing national associations will be unable to set up AHPs and provide access to affordable insurance options to their members.
  • Association Health Plans (AHPs) can bypass certain requirements of the Affordable Care Act (ACA) – AHPs do not have to meet ACA essential health benefits requirements, thus they do not have to cover all the benefits that are currently required in the health insurance plans presently sold in the state exchanges. While this will allow AHPs more flexibility in customizing plan options, and likely result in lower premium costs, it is important for business owners and workers to note that these plans will likely offer less comprehensive coverage.
  • Association health plans cannot restrict membership based on health status or charge sicker individuals higher premiums – An AHP will operate like a large employer plan and includes nondiscrimination rules ensuring the association cannot deny coverage to anyone that meets their membership requirements and wants to purchase coverage. AHPs can adjust premium costs of members based on age, which is similar to age rating rules in current ACA health exchanges.

WIPP has supported the implementation of AHPs as an effective mechanism for small businesses to pool together to obtain affordable health insurance. WIPP submitted comments to the Department of Labor on the proposed Association Health Plan rule, highlighting that WIPP believes that a successful healthcare market should encompass three core principles: an effective pooling mechanism, a wide array of health plan options, and a protection in place for those with pre-existing conditions.

In addition, WIPP recommended including an additional criterion for commonality of interest to allow employers to band together for the purpose of establishing an AHP through a membership organization or association that is comprised of members regardless of whether they are in the same trade, industry, line of business or profession, and regardless of whether they are located in the same area. Unfortunately, as highlighted above, the Department of Labor did not agree with this more expansive view, leaving national business organizations like WIPP unable to set up an AHP across state lines.

The Department of Labor shared a fact sheet on the new rule that noted important dates for associations or business owners interested in AHPs:

  • All associations (new or existing) may establish a fully-insured AHP on September 1, 2018.
  • Existing associations that sponsored an AHP on or before the date the Final Rule was published may establish a self-funded AHP on January 1, 2019.
  • All other associations (new or existing) may establish a self-funded AHP on April 1, 2019.

Although the Affordable Care Act envisioned state exchanges rather than AHPs, WIPP believes there is room for both. Though the Obamacare Exchanges initially gave small businesses more coverage options, many plans have dropped coverage, leaving the small business market with fewer coverage options and premium costs have risen year over year. The expansion of AHPs would provide more cost-effective coverage options for small businesses and the self-employed.

Facts About Recent Changes to Overtime

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The Administration’s final overtime rule, published on May 18th, will make an estimated 4.2 million new workers eligible for overtime pay. Salaried workers, making up to $47,476 annually, will get time-and-a-half payments for work over 40 hours in a week. The effective date is December 1, 2016.

Background

obamatime-state-mapOn March 13, 2014, President Obama signed a Presidential Memorandum directing the Department of Labor (DOL) to “propose revisions to modernize and streamline the existing overtime regulations.” Specifically, the President cited the exemption for executive, administrative and professional employees as having “not kept up with the modern economy.”

In response to the President’s memorandum, Department of Labor issued the proposed rule on July 6, 2015. The final rule was issued on May 18, 2016 and can be found here.

How The Overtime Rule Works

The Fair Labor Standards Act (FLSA) guarantees workers a minimum wage and overtime pay for hours worked above 40 hours in a week. However, some employees are exempted from the overtime pay requirement if:

(1) the employee makes a pre-determined and fixed salary;

(2) the salary is above $47,476 annually;

(3) the employee’s job duties primarily involve executive, administrative, or professional (EAP) tasks.

Since 2004, that salary threshold was set at $23,660 per year. The new rule more than doubles the threshold to $47,476 per year. Employees in executive, administrative, or professional positions making less than the increased salary threshold will not meet this exemption and thus must receive overtime pay. Furthermore, the salary threshold will automatically update every 3 years beginning on January 1, 2020.

WIPP’s Comments and Concerns

The 508-page rule addresses many of the more than 270,000 comments received including specific comments made by WIPP. WIPP advocated for an exemption for small businesses. The DOL recognized WIPP’s concerns, but concluded that their final salary threshold would “provide relief” as it is slightly lower than the $50,440 that was originally proposed. While the salary threshold is lower than estimated, it is still double the current threshold.

DOL also recognized WIPP’s concern of a loss of workplace flexibility. WIPP’s comment noted that many employees perform some of their work remotely and outside of normal business hours, such as working from home. The DOL responded that it “does not believe that workers will incur the significant change in flexibility.” The rule went on to state that, “Employers should be able to trust such valued employees to follow the employers’ instructions regarding when, where, and for how many hours they may work and to accurately record their hours worked.”

WIPP’s also commented on the difficulty of tracking employee hours to ensure compliance. This comment was also recognized by DOL, but they did not address this concern in their final rule.

The Fair Labor Standards Act, which governs the overtime rules, includes a carve-out for businesses that have less than $500,000 in annual revenue and do not engage in interstate commerce. However, DOL guidance suggests that the interstate commerce requirement is likely met by most businesses.

DOL has published additional information on these changes here. Please reach out to WIPP’s Government Relations team at advocacy@wipp.org with any questions.

 

New Overtime Regulations to Take Effect December 1, 2016

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By Marina Burton Blickley, Esq., Centre Law & Consulting LLC

A draft of the Department of Labor’s final revised regulations covering white collar exemptions was just released and is set to become effective December 1, 2016 – right after elections.  The final rule sets the new salary threshold for exempt executive, administrative, and professional employees at $47,476 annually and $134,004 for exempt highly-compensated employees.  This is a dramatic increase from the prior levels of $23,660 and $100,000.  Now that the final salary levels are known companies should be reviewing their employee classifications and making adjustments where necessary to be prepared to be in compliance come December 1, 2016.  Government contractors with contracts covered by the Service Contract Labor Standards (formally Service Contract Act) should also perform an analysis to ensure employees performing services on those contracts are being provided appropriate wages and health and welfare benefits since the FLSA overtime exemptions are used to determine coverage under that Act.

There have been a number of recent updates to the employment laws governing employers generally and, in particular, government contractors.  WIPP’s Give Me 5 recently hosted a webinar covering these and other changes.  To learn more, please listen to the podcast available here –

 

Give Me 5: Where Human Resources and Government Contracts Intersect

Guest Speakers:  Barbara Kinosky, President and Managing Partner, Centre Law & Consulting and Marina Blickley, Associate, Centre Law & Consulting

Federal contractors are subject to a unique set of rules, laws and regulations.    Many of these laws and regulations also apply to subcontractors.   This session covers the more complicated areas where HR and government contracts intersect.  Topics include:

  • OFCCP – latest news on increased HR compliance requirements
  • Executive Order actions and recent regulatory changes
  • Common challenges to complying with the Service Contract Labor Standards/Service Contract Act
  • Tips for handling whistleblower and relator complaints
  • Handling mandatory disclosures
  • Changes to implement now

Listen to the Podcast | View the Presentation

 

Costs and Benefits: Paid Sick Leave For Federal Contractors

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By: Jake Clabaugh, WIPP Government Relations

sick leave paidFederal contractors have been hit with a bevy of new regulations over the past few months – everything from increased reporting of labor and safety violations, a raise in minimum wages and increases in mandatory overtime pay. The next shoe will drop in January 2017, when ALL Federal contractors, primes and subs, will have to provide paid sick leave benefits to workers. The Department of Labor (DOL) proposed rules that would implement this change last month.

Contracts issued January 1, 2017 will require all Federal contractors to give employees 1 hour of paid sick leave per 30 hours worked. This rule will only apply to time spent on Federal contracts, so if an employee performs some work for a private sector client, those hours would not count toward sick leave accrual. Additionally, earned sick leave will carry over from one year to the next.

Why just contractors? The President issued an Executive Order to make the change. Like other new regulations pertaining to contractors, the President can make these decisions for his workforce. Congress has been unable to decide if or how to move forward on these issues so the President decided to act on his own. As the Commander in Chief, he can determine procurement policy – including requirements for contractors – without Congress having to pass a law.

While WIPP members support worker benefits in practice, we don’t believe that the DOL gave enough consideration to how this rule will affect small businesses. Without an exception for small businesses, the vast majority of women-owned business will be compelled to provide the same benefits as multi-billion dollar firms.

WIPP’s comments to DOL on the proposed rule can be read in full here.

Overtime Rule is Over The Top

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By John Stanford, WIPP Government RelationsOvertime pic

The Department of Labor, it would appear, is working overtime. Two weeks ago, WIPP responded to the agency’s proposal to require labor history for federal contractors. Now, WIPP is addressing a different proposed regulation – this one making changes to overtime pay. Both proposals were well intentioned, and both pose risks to women entrepreneurs.

Disclaimer: this blog is a brief summary, so if your business may be affected I encourage you to read WIPP’s comment in its entirety.

It all began last spring, when President Obama directed the Labor Department to update overtime regulations, saying the standards for some employees had “not kept up with the modern economy.” Specifically, the so-called white-collar exemption was out of date. The exemption allows employers to avoid paying overtime (required anytime an employee works more than 40 hours a week) for executive, administrative, and professional employees because they typically have better pay, benefits, and privileges.

The exemption has three criteria. First, the employee must be salaried. Second, the salary must be above a certain threshold. Third, the employee duties must meet certain criteria – basically, you cannot just give someone a manager’s title and exempt them; they must be acting as a manager.

To answer the President’s call for modernization, the Labor Department proposed to update the second piece, the salary threshold, from roughly $24,000 to $50,440 and index it to economic growth. Essentially, this qualifies white-collar employees who make less than $50,000 a year for overtime pay if they work more than forty hours a week.

WIPP agrees with the President that our regulations do not match a 21st century economy, and we should work on updating these requirements for a fair and modern workplace. Moreover, companies that are purposefully skirting the rules on overtime pay and cheating otherwise qualified employees should be held accountable.

Nonetheless, simply doubling the salary threshold goes too far and achieves too little. While large companies in large cities may be able to afford a $50,000 salary floor, the entrepreneurial community is left with bad options: possibly cut employees to afford a minimum salary for others, or restrict working hours and set up an hourly tracking system. Notably, the Labor Department estimated only a quarter of employees will likely see higher paychecks. Others may see reduced hours.

In the comment, WIPP highlighted concerns about the cost to implement the rule, difficulties in application of the rule, and the dangerous impact on employee wages and benefits.

The Labor Department predicted that simply implementing this change would cost small businesses, including the vast majority of the nearly ten million women-owned firms, between $130-$180 million in the first year alone. That does not include the more than $500 million in increased wages small businesses are expected to pay. The Labor Department itself mentions that business could cut hours and benefits to make up for this loss.

Moreover, to ensure compliance with these new regulations, businesses will begin closely monitoring and tracking their employees’ work hours. Tracking and monitoring employee hours is very difficult, if not impossible, given the evolving dynamics of the workforce. Many white collar employees have flexible schedules, work from home, check and answer emails from smartphones or tablets and are no longer restricted by a rigid 9-5 schedule.

It also isn’t just companies. Non-profits face the same requirements. An exception for them (as well as small businesses) is so narrowly crafted it may not cover many mission-oriented organizations or the smallest of businesses. Both are places where working above and beyond forty hours a week may be more about commitment to a cause than a bigger paycheck. For this reason, WIPP asked that the exception be broadened to actually apply to small businesses and non-profits.

The idea that our regulations need to be updated is not political – it’s common sense. But often the regulatory pendulum swings too far as it has here. As proposed, women entrepreneurs could face the arduous tasks of transitioning current employees from salaried to hourly workers and possibly cutting benefits to make payroll all while tracking and limiting employee hours. Talk about working overtime.