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Insight & Impact: Labor & Employment Regulatory Update

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General L&E Affirmative Action
Benefits Immigration
OSHA

General L&E

ISSUE: Labor and Employment Legislative Updates

As Congress closes out this year's legislative session and returns in 2018 following the holiday break, employers should have on their radar several labor and employment bills currently pending on Capitol Hill that could, if enacted, change the game for businesses. Earlier last month, the U.S. House of Representatives passed the Save Local Business Act (H.R. 3441), which would, as we previously reported, amend the National Labor Relations Act and Fair Labor Standards Act and reverse the Obama labor board's expanded theory of joint employer liability by limiting an employer's potential liability to workplaces only under their "actual, direct and immediate control." In practical terms, this would free franchise organizations from assuming liability for their local chains, which often set their own workplace policies. A companion bill has not yet been introduced in the U.S. Senate, where Republicans will need to sway enough Democratic senators to avoid a filibuster. Close observers are optimistic that such a bill will be introduced shortly.

Employers should also be aware of two additional bills which could significantly impact labor relations. The first, the Employee Rights Act (S. 1774), was introduced in September of this year by Senator Orrin Hatch (R-Utah). It includes broad revisions of the National Labor Relations Act affecting, among other things, union access to employee information, certification elections and contributions to union political operations. The second, the National Right-to-Work Act (H.R. 785), was introduced earlier this year by Representative Steve King (R-Iowa), and would block employers and unions from including mandatory dues provisions in collective bargaining agreements, thus federalizing a trend that has already swept many states across the country. A companion bill (S. 545) has been introduced in the U.S. Senate by Senator Rand Paul (R-Kentucky).

Both the Employee Rights Act and National Right-to-Work Act have been referred to Congressional committees, but it is yet to be determined whether the bills will be acted on or will die in committee as more pressing legislative concerns take precedence.

IMPACT: We will continue to monitor the relevant legislation and provide updates of any major developments as these proposals work their way through the legislative process.

For more information, please contact Mike Aldana at [email protected] or Tyler Roth at [email protected].


Affirmative Action

ISSUE: Have A Holly, Jolly What? Positively Closing Out the Affirmative Action Plan Year

Federal contractors are required to do a number of tasks during the affirmative action plan year. Because those tasks are not reported on until an OFCCP audit, they often fall to the bottom of the "to do" list. Now is a good time to pull that plan off the shelf (or electronic folder) to see how the Company is doing on what it said it was going to do in the plan year. Some of the most significant follow up items by contractors are as follows:

  1. Review the results of adverse impact analyses for applicants to hires, employees to promotions, and employees to terminations, and follow up on the results that are statistically significant to ensure the Company can explain the results.
  2. Review personnel processes for individuals with disabilities and protected veterans in a form that allows the contractor to prove its review (i.e., a checklist). Common issues are accessibility of parking lot and building, Braille signage, visibility of posters to person in a wheel chair, and accessibility of web site.
  3. Audit compliance with periodic review of physical and mental qualifications in job descriptions, review of denied requests for reasonable accommodation, implementation of anti-harassment practices related to disabled individuals and protected veterans, designation of person responsible for affirmative action in all communications, annual manager training on a contractor's obligations, progress against disabled individuals' goal of 7%, and the contractor's hiring benchmark for protected veterans. This review should be documented so the contractor may show its audit to OFCCP.
  4. Review the Company’s self identification questions for race, sex, disability, and protected veteran status. The Company should confirm that each question has an option for a person to decline to self – identify and that the questions cannot be skipped. The Company should confirm that it is using the mandatory language for disability self-identification. It is common for the self-identification questions approved by the employee handling OFCCP compliance to be changed when implemented within an electronic applicant tracking system. 
  5. Review purchase order terms and conditions to ensure OFCCP's required clauses are included.
  6. Update the EEO policy for the upcoming calendar year and get it signed so it may be posted (calendar year AAPs only).
  7. Ensure the contractor posted an "Invitation to Self-Identify" to encourage protected veterans and disabled persons to self-identify themselves to the Company.
  8. Assess external recruitment sources for protected veterans and disabled persons and be willing to end relationships with poor performing sources. Again, document your assessment.
  9. Prepare report on affirmative action results to management.
  10. Conduct discrimination-focused compensation analysis, which is an annual requirement for a contractor.

IMPACT: As the saying goes, an ounce of prevention is worth a pound of cure.

If you have any questions about OFCCP or affirmative action, please contact Pamela Ploor at 414-277-5661 or [email protected].


Benefits

ISSUE: Year-End Benefit Reminders

Important year-end-related employee benefit legal changes to keep in mind, along with recent developments, include the following.

Health Plans

1. IRS Enforcement of ACA Rules. The IRS announced that it would begin enforcing, in November 2017, the Employer Shared Responsibility Rules ("ESR Rules") which began applying in 2015. These rules generally require "large" employers (usually with 50 or more full-time employees) to offer sufficient health plan coverage or risk a tax penalty.

Affected employers will receive IRS Letter 226J informing them of the penalty. Employers will only have 30 days to respond to the letter and file an appeal. If you believe you might receive such a letter, you should ensure that you have proper documentation in place to respond. Also note that this enforcement is not just theoretical -- we have already seen clients impacted by this shift in enforcement.

2. Reducing Hours to Minimize ESR Rule Risks. Speaking of the ESR Rules, some employers chose to reduce the hours of employees from above 30 hours per week (e.g., 35 or 40 hours per week) to less than 30 hours per week. This "hours management" strategy could reduce an employer's liability under the ESR Rules. However, it could raise risks in other areas, such as the nondiscrimination rules of ERISA Section 510.

Few cases address whether an employer has risk under ERISA Section 510 when it reduces an employee's hours to avoid having to provide health insurance. But that did not prevent plaintiff lawyers from suing Dave & Buster's, the restaurant chain, for its use of this strategy. The plaintiffs claimed that the strategy violated ERISA Section 510. In 2016 Dave & Buster's attempted to have the case dismissed, but that effort failed. On November 17, 2017 a proposed settlement was announced relating to 1,200 employees who were impacted by reduction in hours. The proposed payment to the plaintiffs was $7.4 million. Employers who used this strategy should review the settlement and verify whether the settlement raises additional risks.

3. Delay of Disability Regulations. New disability claims procedure regulations were issued at the end of the Obama administration. The new regulations would require, as of January 1, 2018, additional protections for plan participants who are seeking disability benefits. The disability benefits could be provided in many types of plans, including health plans and even retirement plans -- i.e., not just disability plans are impacted.

The Trump administration announced that they were reviewing the regulations and contemplating: (a) a delay to the effective date; and (b) a substantial change or revocation to the regulations. The day after Thanksgiving the Department of Labor ("DOL") announced that the regulations were being delayed until April 1, 2018. The DOL will use this additional time to determine whether to modify the regulations, scrap the regulations entirely, or keep them all in place, as is.

Retirement Plans

There have not been a large number of legislative or regulatory changes for retirement plans recently. That very well may change in the near future. Tax reform efforts in the U.S. Senate and House of Representatives will likely lead to retirement plan changes. Those could include a reduction in the amount of pre-tax contributions that can be made to 401(k) retirement plans. Other regulatory changes are still pending. These include a likely delay of certain aspects of a new DOL fiduciary rule.

One interesting new development is October 2017 guidance from the IRS on locating lost or missing participants who must, under Section 401(a)(9) of the Internal Revenue Code (the "Code"), receive a required minimum distribution ("RMD") from a retirement plan. If a plan sponsor cannot find a missing participant and therefore cannot make an RMD, does that cause the plan to violate the Code? Would that violation put the plan's tax-qualified status at risk?

The IRS guidance provides some reassurance that the tax-qualified status will not be at risk, as long as the plan sponsor takes these steps:

(1) Search plan, plan sponsor and public records for alternative contact information;

(2) Use a search method such as a commercial locator service, a credit reporting agency or a proprietary internet search tool for locating individuals; and

(3) Attempt to contact the person through U.S. Postal Service certified mail.

Failing to do so may cause the IRS to (in the words of the IRS guidance), "challenge a qualified plan for violation of the RMD standards". So plan sponsors should take steps to ensure they satisfy these new, IRS-approved steps.

IMPACT: Some of these changes are procedural and others pose risks of penalties. Benefits managers should carefully monitor changes as the regulatory environment continues to shift under the Trump administration.

To learn more about how these changes may impact your particular employer-sponsored plans, please contact John Barlament at [email protected].


Immigration

ISSUE: Immigration Compliance Changes for Employers in 2017

Highly Skilled Workers: The Department of Homeland Security issued a new regulation on January 17, 2017 for highly skilled workers. The new rule changed the way certain Employment Authorization Document (EAD) applications are adjudicated, eliminating the 90-day processing rule but allowing Adjustment of Status applicants to continue working based merely on a timely filed pending EAD renewal. In contrast, H-4 and L-2 EAD applicants are required to file their EAD renewals in time to receive the new EAD before the old one expires. Practically, this means H-4/L-2 EAD applicants must now file their EAD renewal applications 5-6 months in advance to avoid a gap in work authorization. The new rule also provides a 60-day grace period to certain temporary workers whose employment terminates. This gives employees sufficient time to apply for a change of status, depart the country, or find another employer before their status terminates. It also provides a window of opportunity for a new employer to file the necessary paperwork for an incoming employee before they run out of status. Finally, the new regulation clarifies the eligibility rules for H-1B exempt organizations.

Presidential Travel Orders for Certain Foreign-Nationals: On December 4, 2017, the U.S. Supreme Court allowed the third presidential proclamation restricting admission to the United States for certain foreign-nationals to go into effect. The proclamation temporarily restricts travel to the United States by citizens of Chad, Iran, Libya, North Korea, Yemen, Syria, Somalia and Venezuela. The restrictions vary by country and can be found here on the U.S. Department of State's website (https://www.dhs.gov/news/2017/09/24/fact-sheet-president-s-proclamation-enhancing-vetting-capabilities-and-processes). The rules surrounding visa issuance and subsequent admission in the country for individuals effected by the travel restrictions can be complicated and are subject to continuing changes. 

Status of DACA Program: On September 5, 2017, the Trump Administration announced a scheduled repeal of the Deferred Action for Childhood Arrivals (DACA) program. The program grants work permits to young adults who, as children, overstayed their visas or entered the U.S. without lawful inspection. The program will be phased out on March 5, 2018, by which point Congress will need to create a legislative remedy or else the approximately 800,000 DACA recipients will lose their work permits and protection from deportation.

Immigration Audits, Investigations and Site Visits of U.S. Employers: All immigration-related agencies are expected to increase audits, investigations and site visits of U.S. employers in connection with immigration, I-9 and E-Verify compliance. This includes the Department of Homeland Security, the Department of Labor, and the Department of Justice. Civil fines and in certain limited situations criminal penalties can ensue where non-compliance is discovered.

IMPACT: In keeping with the new rules governing EAD processing, employers should pay careful attention to make sure that EAD renewal applications are filed in a timely manner. In many cases, this will mean submitting the renewal application far in advance of the expiration date of the current EAD. Failure to do so could result in the employee temporarily losing his or her work authorization while waiting for the renewal to be processed.

When considering a new-hire candidate for visa sponsorship, employers can now take the 60-day grace period into consideration. For example, if a candidate was terminated from his/her last job less than 2 months ago, there could be enough time to quickly prepare and file a change of employer application on behalf of the sponsored employee to preserve his or her immigration status and work authorization. By the same token, if an employer needs to terminate a sponsored worker's employment for any reason, they can do so knowing that the individual may have as much as 60 days of grace remaining on their immigration status after the date of termination. As with any termination, employers are strongly encouraged to consult with legal counsel beforehand.

The repeal of DACA is primarily an I-9/E-Verify issue for employers. To ensure full compliance, employers should have reminders in place to follow up with any employee with an expiring work authorization document, including DACA-based employees. It is critical to be proactive in this respect so as to avoid inadvertent unauthorized employment.   

In this era of extreme vetting and stepped up enforcement, it is imperative for employers to review their immigration paperwork to ensure that it is in full compliance in the event of an audit, investigation or site visit by a government agency. Whether it is I-9/E-Verify compliance files, H-1B public access files or immigration sponsorship files for temporary workers, companies can avoid fines and other penalties by providing frequent training to their HR professionals and conducting periodic inspections of their immigration paperwork.

To view a recent Quarles & Brady webinar discussing The Year in Review: Immigration Compliance for Employers in 2017, please click here.

For more information, please contact Eric Ledbetter at [email protected].


OSHA

ISSUE: Nomination of New OSHA Leadership and Changes to the Submission Deadline for Electronic Reporting of Workplace Injuries and Illnesses

On October 27, 2017, President Trump nominated FedEx safety official Scott Mugno to lead the U.S. Labor Department's Occupational Safety and Health Administration (OSHA). Mugno started with FedEx Express in 1994 as a senior attorney for domestic regulatory affairs and became managing director of safety, health and fire prevention in 2000. He has worked for FedEx Ground as vice president for safety, sustainability and vehicle maintenance since 2011, thus bringing private sector and workplace safety experience with him to the government agency tasked with enforcing workplace health and safety rules. If confirmed by the Senate, Mugno would take over for Loren Sweatt, the acting assistant secretary of labor for occupational safety and health.

Under the Trump Administration, there has been an obvious movement away from the pro-employee policies and agendas proposed under President Obama. For example, the Trump Administration's regulatory agenda released earlier this year moved several unfinished regulations, including proposals to protect workers from infectious diseases and workplace violence, onto OSHA's "long-term" action list, signaling that they are not a priority.

Mugno has given no indication whether he will focus on changing existing regulations rather than creating new ones, but workplace health and safety experts expect that he will continue the Trump Administration's prioritization for deregulation.

IMPACT: One newly implemented regulation Mugno will be responsible for overseeing and which employers continue to follow closely is OSHA's "Improve Tracking of Workplace Injuries and Illnesses" rule, which requires employers in certain high-risk industries or those with over 250 employees to electronically submit to OSHA their injury and illness data from year 2016. As we previously reported, the deadline for the electronic submission of workplace injuries and illnesses was set for December 1, 2017 after being postponed multiple times and OSHA's temporary shutdown of its online reporting Injury Tracking Application back in August of 2017 due to a potential security breach. Just this last month, OSHA extended the electronic reporting deadline once again to December 15, 2017, giving affected employers additional time to become familiar with the reporting system according to a Department of Labor statement.  Affected employers must use OSHA's Injury Tracking Application (ITA) to submit this data: https://www.osha.gov/injuryreporting/ita/.  According to OSHA, the following OSHA-approved State Plans have not yet adopted the requirement to submit injury and illness reports electronically, and therefore, establishments in these states are not currently required to submit their data through ITA:  California, Maryland, Minnesota, South Carolina, Utah, Washington, and Wyoming.

For more information on Trump's pick to lead OSHA or OSHA's electronic reporting requirements, contact Fred Gants at [email protected].