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Welcome to the Benefits, Inc. Newsletter!
Our newsletter this month is filled with important information concerning FMLA, IRS penalties for small employers reimbursing individual health premiums of employees, and things to consider when terminating an employee. These are topics that we may not be faced with everyday, but when they do present themselves it is good to have a resource to consult.
If you have questions or concerns about these topics or other Human Resource issues please do not hesitate to contact Taylor Luther (tluther@benefits-inc.com) or Kyle Sanders (ksanders@benefits-inc.com) at 615-446-3303.
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Compliance Corner with Taylor Luther
WHAT DO I NEED TO KNOW BEFORE TERMINATING AN EMPLOYEE WITH A DISABILITY?
Scenario: I'm an employer with 50+ employees. I have an employee with a serious illness who is currently on medical leave. At this time, it is unknown when he will return to work or if he will be able to work at full capacity. If he does return to work, I have been informed that he will be having major surgery shortly after his return. Can I terminate this employee?
Under FMLA (Family and Medical Leave Act), an employee is permitted, by law, to take up to 12 weeks of leave within a 12 months period. The 12 weeks may be used all at once or in increments throughout the year.
An employee is eligible if he or she works where the employer has at least 50 employees within 75 miles and has worked there for a minimum of 12 months.
This leave is unpaid, however, an employee who is offered a disability policy and is approved may be able to use that while on FMLA leave. Additionally, the employer must continue to provide health insurance.
FMLA provides protection for employees with disabilities by requiring the employer to allow the employee to return to their job once the leave is over or to an equivalent position with equivalent benefits, pay status, etc. The position offered to the employee upon their return can be different only under certain circumstances, such as a location closing or staff layoffs.
Additionally, anyone in the top 10% of earners in the company may be denied reinstatement if doing so would cause economic harm to the employer.
An employee cannot be terminated for using a legally protected right or filing a legally protected claim, such as taking medical leave under the FMLA or under similar state laws.
While someone cannot be fired because they took protected medical leave, taking leave would not stop them from being fired because of some other issue, including a restructuring or reorganization, for performance-related issues unrelated to the leave, for not following work rules, for poor performance, etc.
Termination after taking FMLA due to poor performance prior to taking FMLA may be viewed as retaliation under the FMLA. The problem is that the employer failed to take any action to correct the employee's shortcomings, even though the employer was aware of those issues. Often, poor performers receive good performance reviews, which makes it even more difficult to assert that he or she would have been terminated had leave not been requested. At that point, it is too late to try and correct the record.
Additionally, employers may lay-off employees out on medical leave without violating the FMLA if a reduction in force results in that employee's entire department or division being eliminated, or the employer can show that all similarly situated employees are being eliminated.
Individuals unable to return to work after the expiration of the medical leave period may be terminated. An employer must make sure that other forms of leave and/or statutory protections do not apply. In addition, the employer must evaluate whether an employee who requests leave because of his or her own serious health condition is not entitle to a reasonable accommodation under the ADA, which would allow the employee to perform the essential functions of his or her job.
If the individual is not protected from termination under the FMLA or they have chosen not to exercise their FMLA right, the employee could still be protected under the Americans with Disabilities Act (ADA). The ADA applies to employers with 15+ employees and prohibits discrimination and ensures equal opportunity for persons with disabilities in employment.
Similar to FMLA, an employee who is disabled cannot be fired simply because he/she is disabled, but if there is a general restructuring eliminating that person's position, the fact that he or she is disabled does not make him or her immune from being laid off. The reasoning is the same for someone on medical leave.
Employers are required to make "reasonable accommodations" to allow disabled employees to work, though employers are not required to take unreasonable steps, such as inventing a job for someone who cannot do any positions the company needs.
"Reasonable accommodations" means an adjustment to a disabled worker's working conditions or environment to enable her to perform an essential function of her job. To be reasonable, the adjustment cannot create an undue hardship for the employer.
"Reasonable accommodation" includes but is not limited to the following:
- Some renovations to existing facilities to make them readily accessible and usable by persons with disabilities.
- Job restructuring
- Modification of work schedule
- Reassignment to vacant positions
- Acquiring or modifying equipment or devices
- Adjusting or modifying examinations, training materials/programs and policies
- Providing qualified readers or interpreters
Again, the adjustment cannot create an undue hardship for the employer. An undue hardship is an action which would require significant difficulty or expense when considered in light of several factors. These factors include:
- Size of the business
- Financial resources of the company
- Nature and structure of the company
To avoid a claim that the employer discriminated against the employee (ADA), or that the employer interfered with the individual's rights under the FMLA, the employer must be able to show that the employee would have been terminated even if that individual had not taken medical leave. Generally, the reason for the termination should occur relatively close in time to the decision to terminate the employee. Often, the longer the time period between those two events, the less reasonable the termination decision will appear, and the more likely it will be viewed as a retaliation for taking leave or interference with an individual's FMLA rights, both of which are prohibited conduct under the FMLA.
Suggestions for Compliance:
- Perform honest performance evaluations. Avoid glowing reviews despite known performance problems.
- Take action to address performance problems when they occur. Do not wait until an employee requests leave to get serious about taking corrective action.
- Include handbook provisions that provide for immediate termination for serious policy violations, acts of dishonesty, fraud and the falsification of documents.
- Apply company rules consistently so that all employees are subject to the same disciplinary procedures for similar performance problems.
Taylor Luther
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IRS Penalties for Small Employers Reimbursing Individual Premiums Will Not Apply Until July 2015
IRS Notice 2015-17 provides limited transition relief from the assessment of excise taxes for
small employers who reimburse, or directly pay, the premium for an employee's individual health insurance policy.
Prohibited Plans
An "employer payment plan" is an arrangement under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy, or an arrangement under which the employer uses its funds to directly pay the premium for an individual health insurance policy covering the employee. Pursuant to prior agency guidance, employer payment plans are generally considered group health plans that do not comply with certain market reforms of the Affordable Care Act (ACA), and therefore may be subject to a $100 per day excise tax per applicable employee under the federal tax code.
Note: An employer payment plan that has fewer than two participants who are current employees (for example, a retiree-only plan) on the first day of the plan year is not subject to the ACA market reforms.
Transition Relief
The transition relief applies to employer healthcare arrangements that constitute employer payment plans if the plan is sponsored by a small employer --generally an employer with fewer than 50 full-time employees, including full-time equivalents, as determined in accordance with the "pay or play" rules.
An excise tax will not be asserted for any failure to satisfy the ACA's market reforms by employer payment plans sponsored by small employers that pay, or reimburse employees for individual health policy premiums:
- For 2014, for employers that qualify as small employers for 2014; and
- For January 1 through June 30, 2015, for employers that qualify as small employers for 2015.
After June 30, 2015, such employers may be liable for the excise tax. The relief does not extend to stand-alone HRAs or other arrangements to reimburse employees for medical expenses other than insurance premiums.
Additional Information
Notice 2015-17 also clarifies that employers can generally increase an employee's compensation to assist with payments of individual market coverage, so long as the payment of additional compensation is not conditioned on the purchase of health coverage and the employer does not otherwise endorse a particular policy, form, or issuer. Due to the potential for significant penalties and the complexity of the law in this area, employers considering a cash (or payroll practice) option are strongly advised to consult knowledgeable benefits counsel to ensure full compliance with the law.
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Final Forms and Instructions for Employers to Report Health Coverage and ACA Compliance
The IRS has released finalized forms and instructions for employers subject to the new information reporting requirements under the Affordable Care Act (ACA):
- Forms 1094-C and 1095-C will be used by large employers (generally those with at least 50 full-time employees, including full-time equivalents) to report information to the IRS and to their employees about their compliance with "pay or play" and the health care coverage they have offered.
- Forms 1094-B and 1095-B will be used by self-insuring employers (regardless of size) and other parties that provide minimum essential health coverage to report information on this coverage to the IRS and to covered individuals.
- Note: Employers that are subject to both reporting provisions (generally large employers that sponsor self-insured group health plans) are permitted to satisfy their reporting obligations on Form 1095-C, which has separate sections for reporting.
Information reporting was voluntary for calendar year 2014. Affected employers are required to report for the first time in early 2016 for calendar year 2015.
Employer Action Items for 2015
To help complete the new IRS forms for 2016, large employers need to track certain information for each month in 2015, including whether the employer offered full-time employees and their dependents (if any) minimum essential coverage that meets the ACA's minimum value requirements and is affordable. An employee is full-time for a calendar month if he or she averages at least 30 hours of service per week (or 130 hours per month). The "pay or play" regulations explain the detailed rules on determining who is a full-time employee. Self-insured employers need to track, among other things, the months for which each individual was enrolled in coverage and entitled to receive benefits.
Our new section on Information Reporting includes additional guidance on both types of reporting, including the content of information reports and returns, and how and when to report and furnish statements.
Source: HR360.com |
FMLA Protections Extended to All Eligible Employees in Same-Sex Marriages
Effective March 27, 2015, a final rule from the U.S. Department of Labor (DOL) will extend the protections of the federal Family and Medical Leave Act (FMLA) to all eligible employees in legal same-sex marriages, regardless of where they live.
Under the FMLA, an eligible employee of a covered employer (50 or more employees in at least 20 workweeks in the current or preceding calendar year) is entitled to take unpaid, job-protected leave for specified family and medical reasons. Consistent with previously issued proposed rules and agency guidance, the final rule makes the following major changes:
- The FMLA regulatory definition of "spouse" is based on the law of the place where the marriage was entered into (previously, the definition of "spouse" only applied to same-sex spouses residing in a state that recognizes same-sex marriage).
- The final rule's definition of "spouse" expressly includes individuals in lawfully recognized same-sex and common law marriages, as well as same-sex marriages entered into abroad that could have been entered into in at least one state.
This definitional change means that eligible employees, regardless of where they live, are entitled to:
- Take FMLA leave to care for their lawfully married same-sex spouse with a serious health condition;
- Take qualifying exigency leave due to their lawfully married same-sex spouse's covered military service;
- Take military caregiver leave for their lawfully married same-sex spouse; and
- Take FMLA leave to care for their stepchild (child of the employee's same-sex spouse) or stepparent who is a same-sex spouse of the employee's parent, even if certain in loco parentis requirements are not met.
More information is available on the DOL's FMLA Final Rule Website, which includes links to the DOL's fact sheet and frequently asked questions.
For additional information about the eligibility requirements and qualifying reasons for FMLA leave, visit our section on the Family and Medical Leave Act.
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3 Things to Consider When Terminating an Employee
Terminating an employee is never a pleasant task, but at times it is a necessary part of managing your workforce. Here are some steps you can take to protect your business against possible wrongful termination claims:
1. Understand the Employment At-Will Rule
Almost all states recognize employment at-will. This means that, absent a law or express agreement to the contrary (such as an employment contract), employers may generally terminate an employee for any reason and at any time.
However, there are important exceptions to the at-will rule. For example, under both federal and state law, covered employers may not discriminate on the basis of certain protected characteristics (e.g., race, color, sex, age, national origin, or disability). Another common exception to employment at-will is violation of public policy, meaning an employer cannot terminate an employee for such actions as filing a workers' compensation claim, taking leave to which he or she is entitled, or reporting violations of law.
Exceptions vary by state, so employers should consult an employment law attorney who knows their state law in order to gain a full understanding of rights and responsibilities. Employers should also state that the employment relationship is "at-will" (to the extent permitted by law) in all employee communications, including employee handbooks.
2. Document Performance-Related Issues
Even when the traditional employment at-will doctrine applies, if the reason for an employee's termination seems unreasonable, there is a chance the reason may be deemed a pretext for discrimination or some other unlawful motive, should a lawsuit follow. Therefore, it is in the best interest of all employers to carefully document all instances of poor performance, including records of employee performance reviews and any previous disciplinary warnings or notices. Complete and accurate documentation offers evidence of what occurred, promotes consistency and objectivity, and is a necessary step for companies to support decisions regarding employee discipline and termination.
3. Follow Up on Post-Termination Responsibilities
Termination of an employee does not necessarily end the employer's relationship with, or obligations to, the employee. Post-termination responsibilities may include:
- Delivering the final paycheck, if not provided at the time of termination (be sure to check your state law for requirements related to timing of the final paycheck);
- Continuation of group health benefits under federal COBRA or state continuation laws;
- Unemployment insurance -- generally, employees who lose their jobs are entitled to unemployment compensation benefits (check your state law to determine specific notice requirements that may apply); and
- Benefits to be paid through a qualified retirement plan.
Terminating an employee is a very sensitive matter which requires careful communication and documentation to avoid potential lawsuits or other future problems. It is prudent to consult an employment law attorney before taking any specific steps should the need to terminate an employee arise. You can find additional guidance, forms, and checklists in our section on Discipline & Termination.
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About Benefits, Inc.
Benefits, Inc. is a full service employee benefits agency. However we also offer Business Insurance, Work Comp, and Risk Analysis. Contact us today at 615-446-3303 for more information. |
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