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|Employment Law News from Vigilant
|Jail time ordered for HIPAA violation
Curiosity killed the cardiothoracic surgeon, figuratively speaking, as he now faces jail time for unauthorized access of patient medical records under the Health Insurance Portability and Accountability Act (HIPAA). The surgeon was employed by the UCLA School of Medicine as a researcher. For three weeks after his termination, the surgeon continued to remotely access confidential medical records for no particular reason, including medical records belonging to his supervisor, his co-workers, and various celebrities. The U.S. Attorney’s Office took a hard stance by prosecuting the surgeon for the HIPAA violation and eventually accepted his guilty plea in exchange for four months of jail time (U.S. Attorney’s Office, CD Cal, press release April 27, 2010).
Tips: Although it’s unclear whether UCLA faced any penalties or sanctions from the U.S. Attorney’s Office for this incident, it certainly could have acted quicker to cut off the surgeon’s access to confidential information once he was terminated. All employers should have procedures in place for disconnecting an employee’s remote access to electronic files once employment terminates. These procedures should be incorporated in a termination checklist that is followed consistently. For help developing such a checklist, contact your Vigilant staff representative, or see our Model Form, “Termination Checklist” (1575).
Guidance issued on grandfathered health plans
Interim final rules interpreting the grandfathering provision of federal health care reform laws have just been published by the Department of Health and Human Services, the Department of Labor and the IRS (75 Fed Reg 34538, June 17, 2010). Under the grandfathering provision, health plans that were in existence on March 23, 2010 need not comply with many aspects of health care reform. This new guidance clarifies that grandfathered collectively bargained plans must implement the same provisions that non-union grandfathered plans must implement (dependent coverage to age 26, no rescission of coverage, restrictions on annual and lifetime limits, and the ban on preexisting condition exclusions). In addition, the following actions will cause a plan to lose its grandfathered status:
• Elimination of all, or substantially all, benefits to diagnose or treat a particular condition
• A change in insurance carriers
• Any increase in the employee’s share of coinsurance
• Any increase in deductible or out-of-pocket limit that exceeds 15 percent over medical inflation
• Any increase in copayments that exceeds the greater of: $5 increased by medical inflation or medical inflation plus 15 percent
• A decrease in employer contribution rates of more than five percent below that in effect on March 23, 2010
• The addition of an annual limit on the dollar value of benefits
• A decrease in any existing annual limit under the plan
Plans may take the following actions without endangering their grandfathered status:
• Enroll new employees and their families
• Add family members of enrolled employees
• Make changes to voluntarily comply with health reform mandates
• Make changes to comply with federal or state law
• Increase benefits
• Change the amount of premiums
• Change third party administrators
Tips: While maintaining grandfathered status is a good idea in theory, it may not be realistic for all plans and all employers because, while you may avoid certain health care reform mandates, you will also forego the opportunity to make cost-saving adjustments to your plan. Work with your health plan adviser to determine whether maintaining grandfathered status is best for your plan. If you participate in the Vigilant Group Benefits Trust, expect further communications from Vigilant in the coming months regarding the grandfathered status of your plan.
Supreme Court says two-member NLRB had no authority to issue decisions
The National Labor Relations Board (NLRB) must have a minimum of three members in order to issue decisions in labor disputes, ruled the U.S. Supreme Court. The NLRB normally has five members, but had been limping along with only two, a Republican and a Democrat, who together issued decisions in almost 600 cases over a 27-month period, beginning in January 2008. The Supreme Court said the National Labor Relations Act requires a minimum of three people to be active members of the Board. The Court said the law “does not authorize the Board to create a tail that would not only wag the dog, but would continue to wag after the dog died” (New Process Steel, L.P. v. NLRB, U.S., June 17, 2010).
Tips: Most of the Board’s past decisions probably will stand, since they weren’t appealed. But there are at least 74 decisions that are currently on appeal which will likely be sent back down to the NLRB, which is what the Supreme Court did in this case. We expect the current Board’s review of these cases to be much more union-friendly, since two of the vacant spots were recently filled by the President while the Senate was on recess, putting the Board membership at three Democrats and one Republican, with one Republican seat left vacant. Vigilant will keep members updated on any significant decisions.
Denying COBRA for gross misconduct: hard concept to grasp
Should mooning another employee qualify as gross misconduct when determining whether an employer can deny continuation coverage under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA)? How about forging an undergraduate degree and concealing a criminal background in order to get hired as a visiting college professor? Although common sense probably tells you that both of these instances should qualify as gross misconduct, meaning the employer wouldn’t have to extend insurance coverage under COBRA, only one actually did according to the two courts that heard the cases.
For the mooning incident, the court decided that the single, isolated, impulsive incident wasn’t enough to be considered gross misconduct (Stormont-Vali Health Care, Inc. v. U.S. Dept. of Labor EBSA, D Kan, May 2010). But for the college professor, who lied for over a year about his credentials and background, the court determined the conduct was sufficiently outrageous, intentional and sustained to be considered gross misconduct (Moore v. Williams College, D Mass, April 2010).
Tips: These two cases illustrate the difficulty and unpredictability of proving that an employee has committed gross misconduct under COBRA. For more discussion and examples, see our Legal Guide, “COBRA Continuation Coverage: Termination for Gross Misconduct Exception” (1237).
Form 1099 reporting to cover all vendors
Accounting departments, beware! Beginning in 2012, companies will be required to report to the IRS all payments worth $600 or more per year to any vendor, including payments to corporations and payments in exchange for property. This greatly expands the number of Forms 1099-MISC that businesses must file. The new requirement was inserted into the Patient Protection and Affordable Care Act to help the IRS discover and collect unreported income, thus helping to fund some of the health care reform measures in the bill (P.L. 111-148, Sec. 9006). Currently, employers use Form 1099-MISC to report only certain nonwage payments, such as payments for services to individuals who are independent contractors.
Tips: If you don’t work in accounting, pass this article along and then back away slowly. The change means that your organization likely will have to get tax ID numbers from every business from which it makes a purchase of $600 or more, and all businesses that provide a service worth $600 or more per year. Watch for further guidance from the IRS as the effective date draws nearer. Efforts are underway to repeal the provision, but it may be difficult to do so in an economic climate where every penny counts.
Enforcement of identity theft red flags rule delayed
The Federal Trade Commission (FTC) has once again delayed enforcement of its rule requiring “financial institutions” and “creditors” to establish procedures for detecting potential signs of identity theft (red flags). The agency will delay enforcement through December 31, 2010, to give Congress time to consider narrowing the scope of the law that prompted the FTC’s rule. As it stands now, the law could potentially affect many businesses that maintain accounts allowing consumers to make multiple payments or transactions. For example, if you allow employees to use a debit card to access benefits under your company’s health care flexible spending arrangements, you would be required to implement protections against identity theft. For more information, see the red flags rule (16 CFR Part 681) and the FTC’s online guidance.
Q&A: Final paycheck after employee admits lying about SSN
Question: Our employee recently admitted that he falsified his Social Security Number (SSN) when filling out his I-9. He gave us a new SSN that he swore was real, but we chose to fire him anyway for falsifying company records. But now we’re unsure how to report his final paycheck: Should we use the old SSN that we know doesn’t belong to him, or the new SSN that we haven’t verified?
Answer: Neither. If you report the wages to the IRS using a SSN that you know to be incorrect, you could face penalties. At the same time, you don’t want to report wages to a potentially questionable SSN. The IRS doesn’t offer any specific guidance about your situation, but they do have guidance regarding new employees who don’t provide an SSN. In that case, employers are to complete a W-2 form by entering all zeros (0) in the box requesting the employee’s SSN.
Vigilant recommends reporting final wages in the same way. You’ll want to complete Form W-2C, “Corrected Wage and Tax Statement” and Form W-3C, “Transmittal of Corrected Wage and Tax Statements,” by putting zeros in the box provided for the employee’s SSN. This way, the IRS knows that you didn’t intentionally report the employee’s wages under the wrong SSN and that you’ve corrected the reporting error once it was discovered.
CALIFORNIA: Cal-COBRA updated to parallel federal COBRA
Cal-COBRA, California’s medical continuation coverage law for small employers (two to nineteen employees) has been updated to parallel the federal COBRA subsidy under the American Recovery and Reinvestment Act (ARRA). Although the federal COBRA subsidy isn’t available for qualifying events that occur after May 31, 2010, individuals whose qualifying events occurred earlier are entitled to notice of the availability of the federal subsidy. The California law has one unique feature, however: information about the subsidy must be posted on the health plan’s website (SB 838, 2010 Cal Laws Ch 24). For more information about the federal COBRA subsidy, see our Legal Guide, “COBRA Provisions of the American Recovery and Reinvestment Act of 2009” (6015).
OREGON: BOLI finalizes meal period and overtime rules
The Oregon Bureau of Labor and Industries (BOLI) has finalized its recent proposals on clarifications to the rules on meal periods and overtime. The final rules contain three main changes:
• Employees who don’t get 30 continuous minutes for a meal period must be paid for the entire 30-minute meal period. This is a clarification of existing policy. Vigilant warned in written comments that the new language could have the unintended consequence of requiring employers not merely to pay for the actual meal period, but to pay for a guaranteed 30 minutes of meal time on top of the actual hours worked. Although BOLI stuck with its proposal, the head of the wage and hour division confirmed in a subsequent email that BOLI would only require the employer to pay for the actual time worked.
• Employers have the option to pay exempt computer professionals at the salaried equivalent of the minimum hourly rate of $27.63.
• Workers who provide companionship services for the elderly or infirm are exempt from minimum wage and overtime, even if they are employed by a third party.
If you have questions, contact your Vigilant staff representative, or see our Legal Guides, “Breaks and Meal Periods – Oregon” (2085) and “State Laws on the White Collar Exemptions from Overtime” (4051).
OREGON: Free seminar on credit history restrictions
The Oregon Bureau of Labor and Industries (BOLI) is presenting two free seminars explaining the state’s new law restricting employers’ use of credit histories (SB 1045, 2010 Or Laws Ch 102, effective July 1, 2010). The seminars will take place on Thursday, July 1, at the Portland state office building (800 NE Oregon Street). No registration is required, and seating is first-come, first-served. For more information, see BOLI’s informational flyer.
WASHINGTON: Want to see who’s getting “nailed” by L&I?
The next time you hire a contractor, you may want to first check out the Department of Labor & Industries’ (L&I) new blog, called Nailed, to make sure your contractor’s on the up-and-up. The blog highlights important cases of workers’ comp and contractor fraud, including major convictions, surveillance videos and links to fraud-related news coverage. You’ll also find information about upcoming L&I workers’ comp audits and other useful information. For questions regarding worker’s comp compliance, be sure to call your Vigilant staff representative.
Can you believe it!
A newly hired female employee in a chicken-processing plant was the target of repeated wolf whistles and sexual comments by coworkers. When she complained to the line supervisor, he responded (brace yourself), “well, you know, you are hot.” The coworkers’ conduct escalated, and after five weeks on the job she quit and sued for sexual harassment. An indignant jury decided the supervisor, the HR manager and the company were definitely not hot. The price tag: over $65,000 in back pay, over $63,000 in front pay, $750,000 for emotional distress and $300,000 in punitive damages. (West v. Tyson Foods, Inc., 6th Cir, April 2010).
UPCOMING EVENTS, TRAINING CLASSES AND WEBINARS:
Is training too expensive? Do you wish we had training in other subjects? Or, do you have difficulty getting the training you need because you’re located in a remote area? We’re excited to announce that we have NEW online classes for our members—over 3,000 titles to choose from! Our new online classes provide you with a more affordable way to get training for you and your employees—no matter where you’re located!
Topics such as: Marketing, Sales, Accounting, Operations, Diversity, Interviewing Skills, Microsoft Excel, Microsoft Word and more are now all available to you at reduced member rates. To see a complete list, check out the catalog of online classes. If you already have an email and password to get into the member side of our current website, or the old TOC website, you may use that same email and password to login. However, if your name or email address has changed since you initially registered for access to our site, you may have to create a new registration with your current information. You can register under “Vigilant members registration” at: www.companycollege.com/vigilant.
We’re thrilled to be able to bring you more affordable options for training. Please feel free to give us your feedback, concerns, or requests at: firstname.lastname@example.org.
Don't see classes in your area? Contact Nicole Forward at email@example.com to request classes in your community. To learn how to register for open training classes, see our webinar for registering yourself (approximately ten minutes) or registering others (approximately seven minutes).
By attending 10 half-day classes in 5 months, employees can earn a “Fundamentals of Leadership” certificate in Everett, Washington, beginning this August. Or, participants can sign up for individual sessions using the links below. To register for the “Fundamentals of Leadership” certificate series, contact Nicole Forward (firstname.lastname@example.org or 800-733-8620).
Coming soon: Open classes in Tigard, Oregon
August 17, Everett, WA
September 23, Spokane, WA
Communications Skills 101: Interpersonal Communications
August 18, Everett, WA
Hiring the Best (for Supervisors)
August 26, Spokane, WA
Legal Issues for Supervisors
September 14, Everett, WA
Preventing Discrimination and Harassment
September 15, Everett, WA
October 12, Everett, WA
October 13, Everett, WA
October 21, Spokane, WA
December 15, Everett, WA
Proactive Supervision: Sowing Seeds for Success
November 9, Everett, WA
November 18, Spokane, WA
Effective Discipline: When Coaching Doesn’t Work
November 10, Everett, WA
December 14, Everett, WA
December 16, Spokane, WA
Recent webinars are available as on-demand recordings that you can watch and listen to on your computer. Available titles range from $99 to $159.
Over 3,000 online courses are available on a variety of topics through a partnership with the Business Training Library (BTL). Employees’ completion of each course can be verified by HR. For more information, see our four-minute webinar on how to access free online demos or our ten-minute webinar on how to take the online courses.
Vigilant Counsel is a publication of Vigilant, 6825 S.W. Sandburg St., Tigard, OR 97223, telephone 503-620-1710. © 2010 Vigilant. This publication presents general information in nontechnical language. Before applying this information to specific management decisions, consult legal counsel, or consult Vigilant staff in the following offices:
Writers This Issue: Kristine Cienfuegos, Karen Davis, Diane Weisheit