Header graphic for print

The Labor & Employment Report

EEOC Says Sexual Orientation Is Protected Under Title VII!

Posted in Employment Discrimination, Laws & Regulations

So I’ve noticed that the EEOC likes to adopt major policy shifts in sneaky ways.  For example, when the EEOC first decided that pregnancy-related impairments may be disabilities under the amended Americans with Disabilities Act, it didn’t put in the revised regulations, but slid it into the Q&A document on the revised regulations.  When the EEOC decided that discrimination based on gender identity or transgender status was sex discrimination under Title VII, it stated this in a federal sector case (there’s a different EEOC process for government employees than for the rest of us), which is more difficult for the public to hear about.  (I previously blogged about this case, Macy v. Dept. of Justice).  And now the EEOC has done it again, with regard to sexual orientation discrimination, in another federal sector case – Baldwin v. Dept. of Transp.

Prior to this case, the EEOC had been very clear that sexual orientation itself was not protected by Title VII.  In November 2014, it issued a document, “What You Should Know about EEOC and the Enforcement Protections for LGBT Workers.”  (Let’s call this version 1 – you’ll see why in a minute).  In that document, while the EEOC flatly stated that gender identity discrimination is discrimination on the basis of sex under Title VII, the EEOC originally said, “The Commission has … found that discrimination against lesbian, gay, and bisexual individuals based on sex-stereotypes, such as the belief that men should only date women or that women should only marry men, is discrimination on the basis of sex.” (Emphasis added).

Courts in private sector cases, as well as the EEOC in other federal sector cases, have also consistently found that sexual orientation was not protected by Title VII, except to the extent that sex-stereotypes were involved.  For example, the EEOC stated in a 2014 case, Complainant v. Dept. of Homeland Security, that claims of sexual orientation discrimination “may intersect with” claims of sex discrimination where sex-stereotyping is involved.  This use of “intersect” necessarily involves two separate items that meet.

In Baldwin, however, the EEOC now takes the position that “sexual orientation is inherently a ‘sex-based consideration,’ and an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII.”  (Emphasis added).  In addition to noting that sexual orientation discrimination is often illegally based on sex stereotypes (the EEOC’s original, limited position), the EEOC now has added two other reasons as to why sexual orientation discrimination is sex discrimination: (1) “sexual orientation is inseparable from and inescapably linked to sex,” and (2) Title VII prohibits discrimination based on an individual’s association with someone with a protected characteristic (i.e. “associational discrimination”) – in this case, someone of the same sex.

Interestingly, the EEOC admits that “Congress may not have envisioned the application of Title VII to these situations.”  And, in fact, Congress clearly thinks that sexual orientation is not covered by Title VII, as it has repeatedly (over the last 20+years) considered – and rejected – legislation (The Employment Non-Discrimination Act) to make sexual orientation a protected category. But the EEOC apparently will proceed, nonetheless, to broaden the scope of Title VII.

Following the issuance of Baldwin on July 16, the EEOC is moving swiftly and silently to cement this position.  Yesterday, I viewed version 1 of EEOC’s “What You Should Know” document on its website.  This morning (July 23), however, I found a new version of the document has replaced version 1 – without fanfare, announcement, or even any indication that it had been revised!  This new version eliminates the sex-stereotyping limitation and baldly states: “The Commission has also held that discrimination against an individual because of that person’s sexual orientation is discrimination because of sex and therefore prohibited under Title VII. See David Baldwin v. Dep’t of Transportation, EEOC Appeal No. 0120133080 (July 15, 2015).”  In one fell swoop, the EEOC has just expanded the law!  Who needs Congress?

Sneaky.

The DOL Issues Guidance on Independent Contractors

Posted in Independent Contractors, Wage & Hour

So the Department of Labor is on a mission to extend the reach of the Fair Labor Standards Act.  Following on the heels of the proposed overtime regulations, in which the DOL is seeking to expand the number of workers eligible for overtime pay (and thereby increase their income – at least theoretically), the DOL has now issued an Administrator’s Interpretation in which it provides guidance to employers on how to determine whether a worker is an employee or an independent contractor for purposes of the FLSA.  Notably, the DOL states that, under its analysis, most workers are employees. (Well, that’s not surprising, coming from the DOL).

The DOL uses an economic realities test, and notes that this test is broader than the common law test, which focuses on the employer’s right of control over the worker. The economic realities test analyzes whether a worker is economically dependent on the employer, and is thus an employee, or is truly in business for himself as an independent contractor.

The FLSA defines employee as “any individual employed by an employer” and defines employ to mean “suffer or permit to work.” As described in the Administrator’s Interpretation, the following six factors are considered in determining whether a worker is economically dependent on the employer:

  1. “Is the work an integral part of the employer’s business?” If so, it is more likely that the worker is economically dependent on the employer. Work can be integral to a business even if it is just one component of the business, is performed by many others, or is performed away from the employer’s premises.
  2. “Does the worker’s managerial skill affect the worker’s opportunity for profit or loss?” This factor does not focus on whether a worker can simply choose to work more hours, but on whether the worker exercises managerial skills that affects the opportunity for profit or loss beyond the current job (such as decisions to hire others, purchase materials and equipment, advertise, rent space, manage time tables, etc.)
  3. “How does the worker’s relative investment compare to the employer’s investment?” Under this factor, not only must the worker make some investment, but the worker’s investment must be compared to the employer’s investment. If the worker’s investment is relatively minor, that suggests the worker is economically dependent on the employer.
  4. “Does the work performed require special skill and initiative?” Under this factor, a worker’s business, not technical skills, are the focus. The DOL states that “Even specialized skills do not indicate that workers are in business for themselves, especially if those skills are technical and used to perform the work.”
  5. “Is the relationship between the worker and the employer permanent or indefinite?” If so, this suggests an employment relationship. The DOL notes, however, that the lack of permanence or indefiniteness does not automatically suggest an independent contractor relationship; the reason for the lack of permanence or indefiniteness must be reviewed to determine if it is due to “operational characteristics intrinsic to the industry” (such as the use of staffing agency workers) or the worker’s “own business initiative.”
  6. “What is the nature and degree of the employer’s control?” In order to support an independent contractor designation, the worker must actually – not theoretically – control meaningful aspects of the work being performed. An employer who determines a worker’s schedule, dress, or tasks is exercising control over the worker.

The DOL states that no one factor – particularly control – is determinative of whether a worker is an employee.  All the factors must be examined in a qualitative, not quantitative, manner in the broader context of economic dependence.

What does this mean for employers?  Well, your independent contractor relationships should be examined with a critical – and conservative – eye.  And realize that the worker may be deemed an independent contractor under some laws, but an employee under others!

Same Sex Marriage in the Workplace

Posted in Employee Benefits, Employee Leave (FMLA and ADA), Employment Discrimination, HR Compliance, Laws & Regulations

The U.S. Supreme Court’s decision in Obergefell v. Hodges, in which it held that same-sex couples have a constitutional right to marry, made headlines.  This decision has a practical impact on employers – particularly on those with operations in states that to date had not recognized the validity of same-sex marriages.

There are a number of employment rights and benefits that are affected by the Supreme Court’s ruling. These include the following:

  • Federal Family and Medical Leave Act leave, as well as family/medical-type leaves under State laws. The Department of Labor had previously announced a “place of celebration” rule, meaning that if the marriage is valid in the State in which the marriage took place, the FMLA will protect an employee needing leave to care for his or her spouse, regardless of where the employee lives (including in those States that do not recognize same-sex marriage). This ruling, however, means that leave rights under State laws, which may not have previously applied, must be extended to same-sex spouses as well. This includes such statutorily-provided leaves such as sick leave, family and medical leave, domestic violence leave, military family leaves, and Flexible Leave Act leaves (which enable employees to use paid leave for purposes of family illness).
  • Employment policies. If your policies provide other rights for spouses, such as bereavement leave, same-sex spouses will be covered. You should also update any policy definitions to ensure that same-sex spouses are not excluded. Remove any references to “husband” or “wife,” and replace them with “spouse.”
  • Employee benefits. Your insurance, pension, and retirement plans may need to be updated. You should consult your plan administrators and benefits attorneys regarding any required changes. In addition, employees may wish to change beneficiary designations. COBRA will apply to same-sex spouses.
  • Employee contact information. Employees may also wish to update basic contact information as to their spouses.
  • Employee tax information. In addition, employees may wish to adjust withholding information to account for a now-legally recognized same-sex spouse. Income imputed from employer contributions for a same-sex spouse’s health coverage will not be subject to federal income taxes. Employees will also be able to use flexible spending accounts to cover a same-sex spouse’s medical costs on a pre-tax basis.
  • Marital status discrimination. Same-sex spouses will be entitled to protection under State marital status discrimination laws.

Concerns About the Proposed Overtime Rules

Posted in Laws & Regulations, Legislative Developments, Wage & Hour

So, after many months of anticipation, I found the Department of Labor’s proposed overtime rules oddly disappointing. This was supposed to be a major overhaul of the regulations governing which employees would be exempt from the requirement to pay overtime for all hours worked over 40 in a workweek. The current regulations set forth three tests for exempt status: (1) the employee must be paid on a salary basis; (2) the salary level must be at least $455 per week ($23,660 per year); and (3) the employee must meet duties tests specific to the exemption in questions (executive, administrative or professional). We all knew there would be a significant increase in the minimum salary level required for exempt status. But we also expected the DOL to address the duties tests. It didn’t.

In the Executive Summary of the proposed rule, the DOL actually said:

The Department is not making specific proposals to modify the standard duties tests but is seeking comments on whether the tests are working as intended to screen out employees who are not bona fide [Executive/Administrative/Professional] employees; in particular, the Department is concerned that in some instances the current tests may allow exemption of employees who are performing such a disproportionate amount of nonexempt work that they are not EAP employees in any meaningful sense.

What?!! Over 16 months after President Obama signed the Executive Order directing the DOL to revise the overtime rules and almost 300 pages of proposed rules later, all the DOL did was to increase the salary level? And they’re still thinking about what to do about the duties tests?

What is even more troubling is what is likely to happen – that the DOL will make changes to the duties tests in the final rule. These changes will become effective without any of us ever having the chance to see them and comment on them. Regulations are supposed to be subject to a notice and comment period, allowing us – the American public – to weigh in on the proposed rules. The agency is then supposed to consider these comments before issuing a final rule. Apparently, this is not going to happen to any changes to the duties tests!

And back to the salary increase. In his Huffington Post blog announcing the overtime rules revision, President Obama touted an increase to $50,400 per year (which is approximately $970 per week). Oddly, however, the proposed regulations themselves use $951 per week and $49,452 per year, which is supposedly equal to the 40th percentile of earning for full-time salaried workers.  The DOL drops a footnote explaining that this number is based upon 2013 data, but that it will be updated for the final rule. At that point, the DOL said it would “likely rely on data from the first quarter of 2016.” It goes on to note that:

The latest data currently available is from the first quarter of 2015, in which the 40th percentile of weekly earning is $951, which translates into $49,452 for a full-year worker. Assuming two percent growth between the first quarter of 2015 and the first quarter of 2016, the Department projects that the 40th percentile weekly wage in the final rule would likely be $970, or $50,440 for a full-year worker.

I am puzzled by why the DOL, having more current 2015 data on hand, would use clearly obsolete data from two years ago. How is that helpful, really?

But another thing that the DOL fails to mention is in the context of the highly-compensated employee exemption. Under the current rules, an employee who makes $100,000 a year and performs at least one exempt duty also is exempt. The proposed rule states that it is setting the highly compensated salary level equal to the 90th percentile of earnings for full-time salaried workers, which it says is $122,148 annually. Again, according to the Executive Summary footnote, this is based on 2013 data. Unlike the 40th percentile number, however, the DOL wholly fails to address how this 90th percentile number will be updated for 2016. If it applies the same updating methodology as its does for the 40th percentile number, the actual required compensation to meet the highly-compensated exemption in the final rule will be quite a bit higher – likely in excess of $128,000!

We’ll certainly watch to see what happens. Maybe the DOL will pull it together and issue a final rule that makes sense. But I am not optimistic.

 

GINA and “The Mystery of the Devious Defecator”

Posted in Employment Discrimination, Litigation

I love cases with weird facts! And this one has the added benefit of providing an example of a violation of the Genetic Information Nondiscrimination Act. When I do training on non-discrimination and harassment, I have all sorts of fun and interesting examples of other forms of discrimination – sex, race, age, etc. But not genetic information – at least not until now…

In Lowe v. Atlas Logistics Group Retail Servs. (Atlanta), LLC, the court described the situation as “the mystery of the devious defecator.” Apparently, an unknown employee was habitually defecating in one of the company’s warehouses. (The court noted that “Apparently, this problem is not as rare as one might imagine,” citing to a 2014 Huffington Post article, “EPA Employees Asked to Stop Pooping in the Hallway.”) To try to solve the mystery, the company identified which employees were working in the location and at the time of the “defecation episodes.” The company then retained a lab to conduct cheek swab testing for DNA analysis, in order to identify the culprit.

Two of the tested employees (neither of whom was the culprit) subsequently brought suit against the company for violation of GINA, which makes it “an unlawful employment practice for an employer to request, require, or purchase genetic information with respect to an employee.” The company tried to argue that the information sought was not “genetic information,” which it interpreted to mean “information related to an individual’s propensity for disease.” The court, however, pooh-poohed this crappy argument. The court noted that the plain meaning of the statutory language was not so limited. In addition, the legislative history of the statute established that the company’s limited reading of genetic information had been advocated by a small group of legislators but was rejected by Congress. Also, the EEOC’s GINA regulations contemplate that genetic testing can occur for reasons other than the identification of disease.

Bottom line – the court found that the testing violated GINA, and the company’s defense ended up in the toilet.

P.S. And I don’t know if the mystery of the devious defecator was ever solved…

Labor Organizing: There’s About To Be An App For That

Posted in Labor Law & NLRB, Social Media, Unions, Workplace Trends

Recently, The Century Foundation, a group that pursues “non-partisan research and policy analysis” released a report on virtual labor organizing. The report assesses how a mobile application (“app”) or website could provide a platform that would help workers organize for labor campaigns.

According to the report, approximately 96 percent of workers use Internet, e-mail, or mobile devices to connect to work, and approximately 81 percent spend at least one hour on e-mail during the workday. The Foundation further reports that the group of workers that would likely be most interested in labor organizing through social media and digital platforms are younger workers, including millennials, who, according to the report, are more receptive to unionization.

The report lays out aspects of what such an app would need to contain, including providing a common digital forum for employees to communicate about the workplace, coordinate local and regional organizing campaigns, and connect with experienced organizers and labor lawyers.

The National Labor Relations Board “quickie election” rules, in combination with union organizing apps, may increase what has already been a drastic uptick in petitions filed with the NLRB. An organizing app can assist unions in connecting to voters more efficiently and discreetly, making it more difficult for employers to learn of organizing activity in their workplace. Supervisors or management might now find a union flyer in the company parking lot, but soon, those flyers may be replaced with apps that are accessible only through cell phones of the individual employees.

One way to counteract the new wave of technology-driven union organizing is to properly train managers and front-line supervisors to take notice of and address changes in the workplace, including changes in employee personality and morale. This is crucial because an employee who feels as though she is not being heard by her supervisor may soon be able to download an app that provides a way for her to discuss her concerns regarding her workplace, and potentially find other employees who feel similarly.

If and when such an app is developed and implemented properly, it may drastically change the way that unions run organizing campaigns. Employers must be proactive and maintain constant communication between front-line supervisors and rank and file employees to ensure that employees’ concerns are being addressed.

The Law v. the Law According to the Media

Posted in Laws & Regulations, Reasonable Accommodation

Last Friday afternoon, I was listening to NPR. I am a loyal NPR listener and have been for many years. Sure, I know it has a liberal bias, but I always thought – in fact, trusted – that it at least got the basic facts right. Thus, I was unbelievably dismayed by a story on religious accommodations, in which NPR described the recent EEOC v. Abercrombie & Fitch case as the Supreme Court “upholding the right of a Muslim woman to wear a headscarf at work” (or words to that effect). The online version of that story, “Why Are Only Three Observant Sikh Men Serving In The Military?”, starts off with, “If a Muslim woman may wear a headscarf at work, as the U.S. Supreme Court has now affirmed, perhaps a Sikh man should be able to wear a turban while serving in the U.S. military.”

WHAT?!!! That is just wrong. Wholly and completely wrong. Under Title VII, an employer must provide reasonable accommodation for an employee’s (or applicant’s) religious needs, unless the accommodation would pose an undue hardship on the employer. This reasonable accommodation obligation includes exemptions from otherwise-applicable dress code policies to permit religious garb, including headscarves and turbans. That is the law, has been the law, and the Supreme Court’s ruling did not change this.

As we discussed in our May E-Update, the issue before the Supreme Court in the Abercrombie & Fitch case was whether an employer must have actual knowledge of an employee’s religious need in order to be liable for a violation of Title VII. In this case, the applicant did not state that her headscarf was worn for religious reasons, but the company believed that it was and it chose not to hire her because she did not fit its East Coast Preppy “Look” policy. The Court held that if an employer refuses to hire an individual based on its belief that she will require a religious accommodation, and she actually would need one if hired, Title VII is violated. Proof of actual knowledge is not required. This is very different than “affirming” the right to wear a headscarf at work.

I was so upset, I nearly hit the car in front. Yes, I know that’s a bit of an overreaction, but let me explain: NPR’s mischaracterization of Title VII and the Supreme Court’s ruling fosters a fundamental misunderstanding in NPR listeners about the law and the rights and obligations of employers and employees under that law.

This NPR story reminded me of another media moment that caused me distress. I enjoy watching “The Good Wife.” But there was an episode in which the show stated that employees are only protected under the National Labor Relations Act if they are actually seeking to unionize. THAT WAS WRONG TOO! The NLRA protects the rights of employees to engage in concerted activity regarding the terms and conditions of employment – which can include, but is not limited to, unionization. Group discussions about wages or working conditions, even where the employees are not interested in unionization, are protected!

Although I was dismayed by the error, I wrote it off as a television show, and we all know that’s fiction and that shows take liberties with accuracy. But in retrospect, and in combination with NPR’s error, I see a grave problem – the public doesn’t know any better, and they believe what they are seeing, reading, hearing is correct. They may make decisions based on this faulty understanding of the law. And that is not OK. I believe the media, whether entertainment or the news, owe it to us, their listeners, to get it right!

OSHA Releases Guide to Restroom Access for Transgender Workers

Posted in Employment Discrimination, HR Compliance, Legislative Developments, Uncategorized, Workplace Trends

Transgender rights have been receiving a considerable amount of media attention this week, most of which has been sparked by the magazine Vanity Fair featuring a cover story about “Keeping up with the Kardashians” star and former Olympian Bruce Jenner as a trans woman (Caitlyn Jenner). On the same day that the cover story was released, the Occupational Safety and Health Administration (OSHA) published a Best Practices Guide to Restroom Access for Transgender Workers.

The OSHA guide estimates that 700,000 adults in the United States are transgender. According to the website for GLAAD (Gay and Lesbian Alliance Against Defamation), transgender is an “umbrella term for people whose gender identity and/or gender expression differs from what is typically associated with the sex they were assigned at birth.” The OSHA guide states that “many transgender people transition to live their everyday life as the gender they identify with.” Transitioning is a different process for everyone and can include social changes (new first name), medical steps, and changing identification documents.

A month ago, OSHA issued a news release stating that it had entered into an alliance with the National Center for Transgender Equality (NCTE) to provide NCTE affiliates and others with information and resources to help foster “safer and more healthful American workplaces.” The restroom guide was developed at the request of NCTE.

Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. Under OSHA’s Sanitation standard (1910.141), employers under the agency’s jurisdiction are required to provide employees with sanitary and available facilities, so that employees will not suffer the adverse health effects that can result if toilets are not available.

Addressing why restroom access is a health and safety matter, the guide states that when employers restrict employees to use only restrooms that are not consistent with their gender identity or by requiring them to use gender-neutral or other specific restrooms, employees may feel singled out or fear for their physical safety. In some cases, such restrictions can result in employees avoiding using restrooms entirely while at work, which according to the guide, “can lead to potentially serious physical injury or illness.”

The guide establishes the following best practices:

  • Employees should be permitted to use facilities that correspond with their gender identity. For example, a person who identifies as a man should be permitted to use men’s restrooms. The employee should determine the most appropriate and safest option for him- or herself.
  • Employers can provide additional restroom options, which employees may choose, but are not required to use. These include: (1) single-occupancy gender-neutral (unisex) facilities; and (2) use of multiple-occupant, gender-neutral restroom facilities with lockable single occupant stalls.
  • Employees are not required to provide any medical or legal documentation of their gender identity in order to have access to gender-appropriate facilities.
  • Employers cannot require a transgendered employee to use a segregated facility apart from other employees because of their gender identity or transgender status.

OSHA makes it clear in its publication that the guide is not a standard or a regulation and that it creates no new legal obligations on employers. Notwithstanding OSHA’s disclaimer, the Equal Employment Opportunity Commission has taken the position that discrimination against an individual because that person is transgender is a violation of Title VII’s prohibition of sex discrimination in employment. And in Maryland, the Fairness for All Marylanders Act of 2014, which added gender identity as a protected class to Maryland’s laws against discrimination in employment, became effective in October of 2014. There are other state and local laws regarding restroom access as well.

Takeaway:  While the guide is not a standard or a regulation, employers should consider employing OSHA’s best practices as a model for their workplace.  This is especially true for employers in states (such as Maryland) or localities that have made gender identity a protected class.

LA Labor Unions Seek Exemption From Minimum Wage Increase – Oh the Irony!

Posted in Unions, Wage & Hour

Admittedly, as a management-side labor and employment lawyer, I am not always a big fan of the unions. And a recent story in the LA Times just reinforced my negative attitude.

As many of you know, increasing the minimum wage has been a hot political issue, and labor unions have been strong and outspoken advocates of such increases. This was the case in Los Angeles, whose City Council last week approved a city-wide minimum wage increase to (a whopping!) $15 an hour by 2020 (a 67% increase!!!). As the authors of the LA Times article point out, during the months preceding the City Council vote, labor activists opposed special considerations for certain businesses, like restaurants, that argued they would have trouble complying with such an increase.

But now, labor leaders in LA are seeking last-minute changes to the law to permit companies with unionized workforces to negotiate a lower wage! Let’s contemplate that for a moment, shall we? The same folks who insist that employees need – deserve – are entitled to – a wage rate that would supposedly enable them to survive above the poverty level are willing to throw their own people under the bus!

In announcing the minimum wage increase on the Los Angeles County Federation of Labor’s website on May 20, the head of the Federation, Rusty Hicks, stated:

We are one step closer to making history in Los Angeles by adopting a comprehensive minimum wage policy that will change the lives of hundreds of thousands of hard-working Angelenos. The City Council’s action today creates a path for workers to succeed and gives our economy the boost it needs to grow.

Apparently, those same hard-working Angelenos should not include union members. In a separate May 26 statement in support of the modification of the law, quoted by the LA Times, Mr. Hicks then said:

With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them….This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.

There was an outcry in the media regarding this apparent hypocrisy. Some commentators, like Tim Worstall at forbes.com, note the self-serving nature of the sought-after modification. They suggest that this modification will cause employers to agree to unionization, in order to avoid paying the higher minimum wage. And of course, more union members means more union membership fees in the union’s coffers.

This near universal public derision led to yet another statement on May 28 by Mr. Hicks entitled “Let’s Get Something Straight,” in which he indirectly references the issue by accusing business interests of seizing any “half-truth, out-of-context quote or outright lie to misguide the public” in an attempt to “tank” the increase. He also contends that the labor coalition was “surprised” to see that the minimum wage law lacked any protection for worker rights (i.e. deferral to collective bargaining agreements) that exist in other such legislation. (How’s the view from the soapbox, Mr. Hicks?) But at this point, Mr. Hicks and the rest of the labor leaders are apparently willing to table consideration of this modification until a later time.  Stay tuned.

 

The Affordable Care Act Complicates The Use of Temporary Employees

Posted in Employee Benefits, HR Compliance, Independent Contractors, Laws & Regulations, Legislative Developments

Employers did not need another reason to complain about the burdens of the Affordable Care Act (“ACA”). Most of us know that the law includes onerous obligations on employers that have made human resources and benefits personnel’s jobs increasingly difficult. For example, you have to figure out if the law applies to your organization (how many full-time and FTE employees do you have?), to whom you have to offer coverage (full-time, part-time, variable hour, seasonal employees?), what coverage you have to offer (minimum essential coverage that is affordable and meets the minimum value test), how to tell if the coverage you are offering is affordable (something about 9.5% of the employee’s W-2 wages, right?), how to track employees’ hours, etc., etc., etc.!

Well, I am sorry to say that for those of you that use temporary or contract workers, you have another thing to worry about under the ACA. Specifically, you need to determine whether you have to offer those temporary or contract workers health insurance benefits. The ACA requires that an applicable large employer offer health insurance benefits to its full-time employees (those that work on average 30 or hours more a week). The ACA uses the well-known IRS control test to determine who is an “employer.” That is, it does not matter what the agreement between the temporary agency and your organization spells out. If your organization exercises sufficient control over the temp or contractor employee, it will be deemed the common-law employer of that employee. And if that is the case, under ACA, your organization will be obligated to offer health care coverage to full-time workers, regardless of whether you categorize them as “temps,” “temps-to-hire” or “independent contractors.”

That being said, however, the ACA provides a workable option that enables you to – in essence – take credit for an offer of health insurance benefits by the temporary or staffing agency. Specifically, if the temporary staffing agency offers coverage that passes muster under the ACA, you can take credit for that offer. This option is spelled out in the preamble to the ACA Final Regulations on the employer shared responsibility requirements. The provision reads:

 … if certain conditions are met, an offer of coverage to an employee performing services for an employer that is a client of a professional employer organization or other staffing firm (in the typical case in which the professional employer organization or  staffing firm is not the common law employer of the individual) (referred to in this section IX.B of the preamble as a ‘‘staffing firm’’) made by the staffing firm on behalf of the client employer under a plan established or maintained by the staffing firm, is treated as an offer of coverage made by the client employer for purposes of section 4980H. For this purpose, an offer of coverage is treated as made on behalf of a client employer only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay to the staffing firm for the same employee if the employee did not enroll in health coverage under the plan.

(Emphasis added).

If you are inclined to take credit for the offer of coverage by the temporary staffing agency, you should make sure the agreement (including what the additional fee will be) is clearly spelled out in writing. In addition, while the regulations are silent on what the additional fee must be, it should be more than a token.

Now, if this seems like a headache for your organization to take on at this time, I remind you that the ACA requires applicable larger employers (defined as those with 100 or more employees in 2015; 50 or more employees in 2016) to offer coverage to “substantially all” of its full-time employees. “Substantially all” means 70% in 2015 and to 95% in 2016. Therefore, if your percentage of temporary employees falls within the less than 30% this year or 5% next year of full-time employees who are not being offered benefits, you may be fine in terms of ACA compliance. But obviously, you must carefully track the numbers of temporary employees you are using, as compared to the total workforce (including those temp agency/contractor employees) to ensure you stay within those percentages.