Department of Labor | Fraser Blog

Five Stories that Matter in Michigan This Week – March 10, 2023

US Supreme Court Makes Clear that Highly Compensated Employees can be Eligible for Overtime Pay

In Helix Energy Solutions Group v. Helix, the U.S. Supreme Court ruled that highly compensated employees—in this case the employee at issue earned more than $200,000 per year—can be eligible for overtime pay if they are paid on a daily basis as opposed to a salary basis.

Why it Matters: Many employers mistakenly assume that highly compensated employees are not eligible for overtime pay. However, under the Fair Labor Standards Act, employees are exempt from overtime if they earn at least $107,432 per year on a salary basis (and perform executive, administrative, professional or outside sales work. Because the penalties for noncompliance can be steep, employers should consult with legal counsel to help ensure that their workers are classified and paid in accordance with state and federal guidelines.

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How Copyrights Protect Your Business

Copyright is the exclusive legal protection that covers an original work of authorship. Copyrights vest upon creation of the work, which means placing the work onto a tangible medium (e.g., applying paint to a canvas or words to a screenplay).

Why it Matters: As noted above, copyrights vest upon creation of the work, even if it isn’t published. Similar to trademark law, it can be difficult to enforce your copyright if the work is not registered with the U.S. Copyright Office. Learn more.

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Department of Labor Issues Guidance to Employers on Telework

Why it Matters: The Bulletin provides that the protections under the FLSA apply equally to employees who telework as to employees working at an office, factory, construction site, retail outlet, or any other worksite location. Learn more.

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Business Education Series – Teaching Leadership

Hosted at the Lansing Regional Chamber, the March Business Education Series will have Brain Town, founder and CEO of Michigan Creative, who will discuss how to inspire your staff to be the leaders they all have inside of them.

Why it Matters: Brian will also show you how to write core values that can guide your business and help form an unstoppable team. Attendees will learn how to write and use core values, leadership tips, and ways to inspire greatness. Business owners and leaders are encouraged to attend! Learn more.

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The Ins and Outs of Cottage Succession Planning in Michigan (Part Two)

A cottage plan is an agreement that describes how a cottage will be shared, managed and passed on to future generations of family members. Cottage plans typically cover a range of issues that can impede the succession of a cottage if left unaddressed.

Why it Matters: There are significant advantages to having a cottage plan that utilizes an LLC or trust structure. There is no single option that is best for all families, so it’s important to consult with an experienced cottage law attorney to determine what option is right for you. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Labor, Employment & Civil Rights | Aaron Davis

Intellectual Property | Jared Roberts

Cottage Law | Mark Kellogg

Five Stories that Matter in Michigan This Week – March 3, 2023

DOL Issues Telework Guidance to Employers

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How Trademarks Protect Your Business

Trademarks operate to distinguish your business, build consumer goodwill and solidify your reputation as a source for the goods or services. In most cases, a trademark is a distinctive word, phrase, logo or design that is associated with or applied to a category of goods or services.

Why it Matters: If you are in the business of providing goods or services, then it is strongly recommended that you consult with an intellectual property lawyer to get the best protection in a timely manner. Learn more.

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$35 Million in Grants Available for Small Nonprofits

The State of Michigan, Department of Labor and Economic Opportunity (LEO) and Michigan Nonprofit Association (MNA) have teamed up to help Michigan charities whose operations were impacted by the COVID-19 pandemic.

Why it Matters: Under this initiative, called the MI Nonprofit Relief Fund, grants in amounts between $5,000 and $25,000 will be awarded to selected entities with annual revenues total under $1 million. In addition, eligible entities must be based in Michigan and recognized by the IRS under Section 501(c)(3). Learn more.

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Michigan Cannabis Sales Over $200 Million in January

Marijuana sales surpassed $200 million in January, via the monthly report from the Michigan Cannabis Regulatory Agency. Michigan adult-use sales came in at $196,008,634, while medical sales came in at $11,295,443.

Why it Matters: Marijuana sales remain strong in Michigan, particularly for recreational use. However, there still are significant concerns about profitability and market over-saturation that the industry is contending with.

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The Ins and Outs of Cottage Succession Planning in Michigan (Part One)

When purchasing a cottage, it’s often the intent of the owner to pass the cottage on to future generations to enjoy. Unfortunately, that vision may not become a reality due to challenges such as high property taxes, differing objectives among heirs and resulting family disputes that result in the cottage being sold upon the owner’s death.

Why it Matters: Common issues that prevent the passing of a cottage to future generations in Michigan can be addressed through careful cottage succession planning. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

DOL Issues Telework Guidance to Employers

As the modern workforce evolves, more and more employees are enjoying the flexibility of working from home, teleworking, or working away from the employer’s premises. These arrangements allow for greater work-life balance, increased productivity, and cost savings. However, as these teleworking arrangements become more common, it is important for both employers and employees to understand the protections and rights available under the law.

On February 9, 2023, the U.S. Department of Labor (DOL) issued a Field Assistance Bulletin (Bulletin) addressing several questions related to compliance with the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) when a business employs teleworkers. While Field Assistance Bulletins do not have the effect of law, they are nonetheless important statements of DOL policy and statutory interpretation.

The Bulletin explains that under the FLSA, employees who telework are entitled to compensation for all hours worked, including short rest breaks. In qualifying circumstances, employees are also entitled to take breaks to express breast milk free from intrusion and shielded from view. The Bulletin provides that the protections under the FLSA apply equally to employees who telework as to employees working at an office, factory, construction site, retail outlet, or any other worksite location. This means that teleworking employees are entitled to the same compensation and protection as employees working at a traditional worksite.

Similarly, under the FMLA, all hours worked are counted for purposes of determining an employee’s eligibility for leave. The Bulletin provides that when an employee teleworks from home consistently or in combination with working at another or various worksites, all of those hours count towards determining eligibility for FMLA leave. However, the determination of the worksite for an employee who teleworks is fact-specific and will be based on factors such as where the employee reports to work or the location where the employee’s assignments are made.

In conclusion, teleworking arrangements provide numerous benefits to both employees and employers. However, it is important to remember that these arrangements do not exempt employees from the protections and rights afforded to them by the FLSA and FMLA. While the Bulletin doesn’t have the force of law, it’s an important indicator of DOL policy regarding FLSA and FMLA enforcement. Employers and employees must be mindful of the protections and rights the DOL describes are due to telework employees to ensure that teleworking arrangements are fair and equitable for all parties involved.

For questions or assistance, please contact your Fraser Trebilcock attorney.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

Aaron L. Davis is Firm Vice President and Treasurer, and Chair of Fraser Trebilcock’s labor law practice. You can reach him at adavis@fraserlawfirm.com or (517) 377-0822.

Five Stories that Matter in Michigan This Week – February 24, 2023

$35 Million in Grants Available for Small Nonprofits

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Michigan Cannabis Regulatory Agency Suspends Licenses, Issues Advisory

The Michigan Cannabis Regulatory Agency (CRA) recently suspended the licenses of a marijuana processor and issued a safety advisory for items manufactured with “illicit product.”

Why it Matters: This action is an important reminder to marijuana businesses in Michigan that the CRA is active in regulating businesses and taking enforcement action when appropriate. TAS Asset Holdings is the second processor to have its license suspended by the CRA this month. The CRA also announced disciplinary action against 10 marijuana businesses on February 10.

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CRA Publishes January 2023 Data, Average Price Drops

Per recent monthly data published by the Cannabis Regulatory Agency, the average retail flower price of an ounce of cannabis is $80.16, an all-time low, and almost a 50% decrease compared to last year’s average price of $152.74.

Why it Matters: While the prices of cannabis and cannabis-related products continue to decrease and make consumers happy, growers on the other hand are seeing profits decrease resulting in them seeking ways to halt new licenses to be granted in an effort to steady prices. Contact our cannabis law attorneys if you have any questions.

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DOL Issues Telework Guidance to Employers

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ERISA Health and Welfare Plan Voluntary Audit Service

Fraser Trebilcock is excited to introduce our Health and Welfare Plan Voluntary Audit Service to help businesses ensure their health and welfare plans are compliant with the Employee Retirement Income Security Act (ERISA).

Why it Matters: ERISA is a complex set of regulations that governs employee benefit plans, including health and welfare plans. Failure to comply with ERISA can result in costly fines and penalties, not to mention damage to your company’s reputation. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Business & Tax | Robert Burgee
Cannabis Law | Sean Gallagher
Labor, Employment & Civil Rights | Aaron Davis
Employee Benefits | Robert Burgee

Five Stories that Matter in Michigan This Week – October 28, 2022

Governor Whitmer Signs Bipartisan Election Bills

Governor Whitmer recently signed a package of election law bills which impact how clerks process ballots, including those coming from members of the military overseas. Michigan Public Act 195 permits clerks to pre-process absentee ballots two days prior to Election Day, changes requirements for ballot drop boxes to increase security, and requires clerks to more frequently review and update qualified voter files to remove dead voters. Public Act 196 allows military members serving overseas to submit ballots electronically.

Why it Matters: Polling shows that voters are highly energized and polarized leading up to the midterm elections. These laws are meant to address certain voting-related issues, such as ballot box integrity, that have led to controversy in the past. If you have questions about these bills, or election law issues in general, please contact a member of our election law team.

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Department of Labor Issues New Proposed Rule on Independent Contractors

The U.S. Department of Labor recently issued a Notice of Proposed Rulemaking that, if adopted, would change the standard for analyzing a worker’s classification as either an employee or independent contractor.

Why it Matters: Employee misclassification can result in severe financial consequences. Businesses and employers should remain diligent in analyzing their workers’ classifications. Learn more on the subject.

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Michigan Court of Claims Rules in Prevailing Wage Policy Case

Judge Douglas Shapiro of the Michigan Court of Claims recently ruled in favor of the state’s Department of Technology, Management, and Budget (DTMB), when it implemented its prevailing wage policy. The Associated Builders and Contractors of Michigan (ABC) in July 2022 filed a preliminary injunction claiming that due to the 2018 repeal of Michigan’s prevailing wage law, that the state cannot require the wage rate, which the Court denied and agreed that DTMB did not violate separation of powers when implementing its prevailing wage policy.

Why it Matters: October 31 is the deadline for ABC to appeal the decision. If this decision stays, this signals changes to the way organizations do business with the state of Michigan. Learn more on DTMB’s prevailing wage.

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New CRA Director Vows to Crack Down on Black Market Sales

This week, Brian Hanna, the Cannabis Regulatory Agency’s acting director, spoke to media and highlighted the agency’s focus on cracking down on cannabis that is continuing to illegally enter Michigan’s market.

Why it Matters: Though official numbers have not been confirmed, it is known that illicit cannabis is continuing to enter Michigan’s medical and adult-use cannabis markets, causing widespread effects on prices and profits for legal and law-abiding businesses.

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State Court Administrative Office Proposes New Landlord-Tenant Rules

The State Court Administrative Office unveiled new proposed rules that if enacted, would alter the way eviction cases are handled for both landlords and tenants. Rules such as a requirement that tenants be served in person if a landlord wants an immediate default judgement, and the ability for tenants to get an automatic stay if they have applied for rental aid.

Why it Matters: If enacted, these rules would allow commercial and residential tenants more time to pay their landlords if they fall behind on payments, however landlords are against the new proposed rules as they believe it will make the process of finding new tenants more difficult.

Related Practice Groups and Professionals

Election Law | Garett Koger
Labor, Employment & Civil Rights | David Houston
Cannabis Law | Sean Gallagher
Real Estate | Jared Roberts

Department of Labor Issues New Proposed Rule on Independent Contractors

The US Department of Labor recently issued a Notice of Proposed Rulemaking that, if adopted, would change the standard for analyzing a worker’s classification as either an employee or independent contractor. The new rules are a reversion to prior tests, which consider certain “economic reality factors;” factors that were originally set out in a pair of cases before the Supreme Court of the United States in 1947 (See United States v. Silk, 331 U.S. 704, and Rutherford Food Corp. v. McComb, 331 U.S. 722).

The six non-exhaustive and unweighted factors flowing from those cases and included in this new rule are:

The worker’s opportunity for profit or loss depending on managerial skill;
The relative investment of the worker and the employer in the equipment, materials, or helpers required for their task;
The degree of permanence of the work relationship
Nature and degree of control – whether the employer has the right to control the manner in which the work is to be performed;
The extent to which the work performed is an integral part of the employer’s business;
Whether the service rendered requires a special skill or initiative.

These proposed rules are open for public comment until November 28, 2022.

Relatedly, the Internal Revenue Service recently “streamlined” its various “20 Factor” and other tests for independent contractor determination. See, IRS Publication, Topic No. 762. The Service now groups the prior multiple factors into three topics. The IRS Publication states the employer in making its determination, “must examine the relationship between the worker and the business. You should consider all evidence of the degree of control and independence in this relationship. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and Relationship of the Parties.” We add, however, that this “restatement” of IRS policy allows consideration of the prior “20 Factors,” or any others. While worker classification is likely to resolve similarly under DOL and IRS rules, the employer of course must consider both, lest it fall short in one regulatory arena or the other.

We all know that employee misclassification can result in severe financial consequences. Businesses and employers should remain diligent in analyzing their workers’ classifications and consult an experienced attorney with any questions. The attorneys at Fraser Trebilcock Davis & Dunlap, PC will continue to monitor these developments and stand ready to guide clients in their compliance with any new regulation.

Fraser Trebilcock Shareholder Dave Houston has over 40 years of experience representing employers in planning, counseling, and litigating virtually all employment claims and disputes including labor relations (NLRB and MERC), wage and overtime, and employment discrimination, and negotiation of union contracts. He has authored numerous publications regarding employment issues. You can reach him at 517.377.0855 or dhouston@fraserlawfirm.com.

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.

Client Alert: Broker & Consultant Fee Transparency to Group Health Plans

As the health care arena continues to evolve following the ACA and its progeny, one common theme in the regulations has been to increase transparency in the marketplace. Following on that theme, the Department of Labor recently issued its Field Assistance Bulletin No. 2021-03 aimed at the fees charged by group health insurance brokerages and consultants. The language of the Bulletin sets forth the Department’s short to medium term enforcement policy in regard to the amendments made to ERISA section 408(b)(2)(B), which was included as part of the Consolidated Appropriations Act of 2021 (CAA). Taken together, these documents set forth one method the Department will take to achieve the government’s goal of requiring group health plan sponsors, who are charged to act in a fiduciary capacity, to consider the costs of the services provided by certain vendors.

Who is affected?

ERISA section 408(b)(2)(B) applies to all group health plans, regardless of group size, and includes both insured and self-funded plans; all of which are “covered plans.” The sole exception applies to certain small employer health reimbursement arrangements.

The new language applies to “covered service providers” who provide plan related services to “covered plans.” Covered service providers include individuals and entities that enter into a contract or arrangement to provide one or more of the following services to a covered plan:

Brokerage services with respect to selection of:
- Insurance products (including vision and dental);
- Plan management services, vendors, and administrative supports; and
- Stop-loss, pharmacy benefit, wellness, and other plan services.
Consulting services related to the development or implementation of:
- Plan design, insurance or insurance product selection (including vision and dental);
- Plan management services, vendors, group purchasing organization agreements, and services; and
- Stop-loss, pharmacy benefit, wellness, and other plan services.

In addition to providing covered services, the broker, consultant, or other covered service provider must reasonably expect $1,000 or more in direct or indirect compensation in connection with its contract or arrangement with the covered plan.

Additionally, the Bulletin clarifies that only covered service providers who are a party to the contract or arrangement with the covered plan are required to make the disclosure. In this way, the amended statute does not require affiliates or subcontractors, solely by virtue of offering services to the covered plan as an affiliate or subcontractor of the covered service provider, to individually make the disclosures, as they will not have entered into the contract or arrangement with the covered plan.[1]

What information must be disclosed?

Covered service providers must disclose to covered plans specified information regarding the services to be provided and the compensation the covered service provide reasonably expects to receive in connection with its services. At a minimum, this information must include:

A description of the services to be provided by the covered service provider;
- Including, where applicable, information about those services for which the covered service provider will provide or reasonably expects to provide services directly to the covered plan as a fiduciary.
A description of the direct compensation that the covered service provider expects to receive in connection with the contract or arrangement with the covered plan. In most instances, such direct compensation will include some form of commission.
A description of all indirect compensation that the covered service provider, its affiliates, or subcontractors expect to receive.
- Where a covered service provider employs the use of affiliates, subcontractors, or both, the disclosure should also include a description of the arrangement between the covered service provider and the affiliate or subcontractor.
- Indirect compensation disclosures should also include (1) an identification of the services for which such indirect compensation will be received, (2) any formulae relied up in the calculation of such indirect compensation, (3) identification of the payer of such indirect compensation, and (4) a description of the arrangement and any formula amongst and between the payer of the indirect compensation and the covered service provider, affiliates, or subcontractors.
A description of any compensation the covered service provider expects to receive in connection with the termination of the contract, along with a calculation of how any prepayments will be calculated and refunded.

In addition to describing the types of compensation, the covered service provider notice should also include the manner in which such compensation will be received.

Finally, a covered service provider must set forth the services that the covered service provider is rendering to the covered plan as a fiduciary.

When are the disclosures required?

The CAA amendments became applicable on December 27, 2021. Covered service providers, therefore, are required to make their fee disclosures for any new contracts or arrangements as of that date. The Bulletin clarifies that the “effective” date of the contract or arrangement is the date the contract or arrangement was executed, which may not necessarily be the beginning of a new plan year. Therefore, covered plans should consult with and collect the requisite information from their covered service providers for any contracts or arrangements that are written, renewed, or extended in 2022.

Furthermore, in order to meet the objectives of the policy (i.e. allowing covered plans to perform cost-benefit analysis related to the fees charged and services provided by their brokers and consultants), covered service providers are required to make the disclosures set forth above “reasonably in advance” of the date on which the contract or arrangement is entered into, extended, or renewed. Furthermore, any change in such disclosures are required to be made as soon as practicable.

How does a covered plan ensure disclosure?

While the disclosures contemplated by the statutory provision are intended to come from the covered service provider, the fiduciary responsibility rest with the covered plan sponsor. The primary enforcement mechanism, therefore, is to deem nonconforming deals to be prohibited transactions under the statute. However, no such determination shall be made provided covered plans meet the following requirements:

“The responsible plan fiduciary did not know that the covered service provider failed or would fail to make required disclosures and reasonably believed that the covered service provider disclosed the information required to be disclosed.
The responsible plan fiduciary, upon discovering that the covered service provider failed to disclose the required information, requests in writing that the covered service provider furnish such information.
If the covered service provider fails to comply with a written request…within 90 days of the request, the responsible plan fiduciary notifies the Secretary of the covered service provider’s failure…”

Conclusion

As plan fiduciaries consider their options this year, whether its with a new carrier or a renewal, they should begin working with their brokers and consultants to gain a better understanding of the fees that are charged and prepare to answer inquiries about the reasonableness thereof.

[1] Affiliates and subcontractors should review the nature of their relationship to covered plans to ensure that their services do not extend beyond the scope of the services provided on behalf of a covered service provider, thus possibly triggering the need for the affiliate or subcontractor itself to disclose.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients in business transactions, civil matters, regulatory compliance, and employee matters. Bob also has a background in employee benefits, having been a licensed agent since 2014. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.

Aaron L. Davis works in employee health and welfare benefits. He is also Chair of the firm’s labor law practice and serves as Firm Secretary. He has litigation experience in a diverse range of employment matters, including Title VII, the Age Discrimination and Employment Act, the Americans with Disabilities Act, the Family Medical Leave Act, and the Fair Labor Standards Act. You can reach him at 517.377.0822 or email him at adavis@fraserlawfirm.com.

Department of Labor Retains Independent Contractor Test

In January 2021, during the last days of the Trump administration, the U.S. Department of Labor (DOL) issued a “final rule,” to become effective in March of this year, changing the decades-longstanding independent contractor test under the Fair Labor Standards Act (“FLSA”). Under the proposed standard a “two core factor” test was to be applied, which would have narrowed the considerations for exclusion of workers from FLSA coverage as “independent contractors.”

However, on March 12, 2021, the DOL under President Biden announced proposed rulemaking, in effect blocking implementation of the Trump rule. On May 5, 2021, the Department announced a final rule withdrawing the proposed new rule, which the DOL characterized as overly employer-friendly, inconsistent with the purpose of the FLSA, and disruptive to the settled law. Of note, the principal deputy administrator for the DOL Wage and Hour Division stated: “When it comes to digital workers … we want to make sure that we continue to look at their needs, how they are interacting with their individual employers and whether or not they have the protections of the Fair Labor Standards Act.”.

Independent Contractor Test Under the FLSA

The net effect of these maneuverings is that the prior “economic reality” test remains in place without change. This means that the previous guidance from the DOL using a six-factor balancing test, based on Supreme Court precedent, will still be used to determine a worker’s classification. The six factors are:

The nature and degree of the employer’s control;
The permanency of the worker’s relationship with the employer;
Whether the worker, or the employer, provides the means and instrumentalities of the work, such as investment in facilities, equipment, or assistants;
The amount of skill, initiative, judgment, or foresight required for the worker’s services;
Whether the worker is at risk or benefit of profit or loss; and
The degree of integration of the worker’s services into the employer’s business.

IRS Test Remains Unchanged, Also

The IRS test, by comparison, was not changed during the Trump administration. The IRS you will recall uses the “20-factor” test. The test is comprised of three general categories; behavioral control, financial control and relationship of the parties.

The IRS factors are:

Degree of direction of work by employer.
Amount of training required to qualify.
Degree of integration worker’s duties into business.
Must work be done by worker or can worker contract performance to others?
Control of assistants.
Continuance/permanence of relationship.
Control over schedule.
Demand for full-time work.
On-site requirements.
Order and scheduling of work – dictated by worker or employer?
Reporting requirements.
Method of payment.
Compensation for business or travel expenses.
Use of tools, instrumentalities, and materials provided by employer.
Level of investment in employer operations.
Share in gain or loss.
Ability to work elsewhere.
Availability to work for general public.
Control over discharge.
Right to terminate

If you have questions about these changes, please contact Dave Houston or your Fraser Trebilcock attorney.

This alert serves as a general summary, and does not constitute legal guidance. All statements made in this article should be verified by counsel retained specifically for that purpose. Please contact us with any specific questions.

2021 Minimum Wage Rates — Important State and Federal Changes

Minimum wage laws are a mishmash of state and federal statutes and rules. Minimum wage rates and rules beginning in 2021 are an interesting reflection of this split of jurisdiction, and federal rulemaking under the outgoing administration. This blog highlights some of the more impactful changes.

State Of Michigan

The Michigan Minimum Wage Rate, currently $9.65 per hour, is consistently higher than the federal rate. This is permitted by federal law which allows each state to set a higher minimum wage than federal law requires, but not a lower rate. Michigan’s currently-applicable minimum wage law, the Improved Workforce Opportunity Wage Act of 2018 (“Michigan Minimum Wage Law”), provides for conditional annual increases in the state minimum wage. The scheduled rate for 2021 is $9.87 per hour, however, that rate increase does not go into effect when the state’s annual unemployment rate for the preceding calendar year is above 8.5 percent.

The Michigan Department of Labor (“MDOL”) recently announced that the scheduled 2021 minimum wage increase is unlikely to go into effect because the unemployment rate is likely to be over the 8.5% “threshold when [the Bureau of Labor Statistics] releases the final 2020 unemployment numbers for Michigan.”

Assuming the MDOL prediction is correct, then effective Jan. 1, 2021:

Michigan’s minimum wage will remain at $9.65 an hour.
The 85 percent rate for minors age 16 and 17 remains $8.20 an hour.
Tipped employees rate of pay remains $3.67 an hour.
The training wage of $4.25 an hour for newly hired employees ages 16 to 19 for their first 90 days of employment remains unchanged.
Overtime requirements remain the same under the Improved Workforce Opportunity Wage Act.

Under the Michigan Minimum Wage Law, Michigan’s minimum wage rate will increase to $9.87 in the first calendar year following a calendar year for which the annual unemployment rate is less than 8.5 percent. Under that statute, future increases in the minimum wage are conditionally scheduled for future years.

Federal Rules

Important changes under federal law include significant modification to “tipped employee” rules and increased minimum rates for certain workers.

Tipped Employee Rule Changes – Again

On December 22, 2020, the United States Department of Labor (“USDOL”) announced its “final rule” revising prior “tipped employee” regulations implemented under earlier language of the federal Fair Labor Standards Act (“FLSA”). Employers subject to these rules need to be very familiar with these changes as this is a fertile area of stringent federal enforcement. The new rules go into effect 60 days after this announcement, or on or about February 21, 2021.

The “general rule” is that tipped employees must be allowed to retain all their tips, unless the employer has adopted a qualified “tip pool.” Rules for such tip pools are complicated and changed significantly in March of 2018; the new rules replace those prior standards.

In brief, the February 2021 rules:

Continue to allow mandatory tip pooling arrangements.
Continue to allow the employer to pay a lower “tipped employee” rate and take a “tip credit” toward the minimum wage rate the employer would be required to pay if the tip credit is not applicable.
If the employer takes the tip credit it may not include in a mandatory tip pool, employees who do not routinely receive tips (such as back of the house staff).
An employer that does not take the tip credit but instead pays a set hourly rate at or above the applicable minimum wage for non-tipped employees may include employees who do not routinely receive tips in a mandatory tip pool.
Whether or not a tip credit is taken, managers and supervisors (as determined by the FLSA “duties” test) are prohibited from participating in a tip pool.
Tip pool funds must be paid out at least as often as the employer pays out base hourly wages. And,
An employer may take a tip credit for employee time spent performing tasks that do not generate tips (such as stocking, rolling silverware) if the non-tip generating duties relate to the tipped occupation and are performed contemporaneously with, or immediately before or after, the duties for which the employee does receive tips.

Federal Contract Workers

Workers performing work on or in connection with covered federal contracts must, effective January 1, 2021, be paid a minimum wage of $10.95 per hour, pursuant to Executive Order 13658.

The Competition for Workers

Due to the COVID slowdown in the economy upward wage pressure is not anticipated during 2021 according to commentators. However, as recently as this month, the following employers have adopted minimum wage rates significantly above those required by law. Some examples of prominent mid-Michigan and state-wide employers include:

Bank of America: $20
JP Morgan Chase: $16.50–$18 (based on location)
Charter/Spectrum: $16.50
Huntington National Bank: $16
Hobby Lobby $17 (for full-time employees)
Costco: $15
Target: $15
Best Buy: $15

Certain counties, municipalities and economic zones also have adopted minimum wage rates higher than the applicable state rate, although none in Michigan.

If you have any questions, please contact Dave Houston or your Fraser Trebilcock attorney.

We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Client Alert: COVID-19 Group Health Plan Service & Notification Requirements

On April 11, 2020, the Departments of Labor, Health and Human Services, and Treasury (Departments) jointly released frequently asked questions (FAQs) regarding health care coverage issues surrounding the implementation of the FFCRA and the CARES Act. See Joint FAQs.

Notably, the Departments maintain that the FAQs are a statement of policy and are effective immediately.

The Families First Coronavirus Response Act (FFCRA) was enacted on March 18, 2020 and requires health plans and insurers to provide certain items and services related to diagnostic testing for detection of SARS-CoV-2 or the diagnosis of COVID-19 without cost sharing or prior authorization from March 18, 2020 and during the applicable emergency period. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted on March 27, 2020 and broadened the range of diagnostic items and services that plans and issuers must cover. These FAQs represent the Departments’ approach to assist employers, issuers, providers and other stakeholders to come into compliance as well as to help families understand the new laws.

Applicable Plans

The FFCRA and CARES Act apply to group health plans and health insurance issuers offering group or individual health insurance coverage. The term “group health plan” includes both insured and self-insured group health plans, whether they are ERISA plans, non-federal governmental plans or church plans. The term “individual health insurance coverage” includes individual market coverage through or outside of an Exchange. It also includes student health insurance coverage.

However, short-term, limited-duration insurance is not subject… neither are excepted benefits or plans covering less than two employees (such as retiree-only plans).

Duration of Compliance

The FFCRA provisions are effective March 18, 2020 and continue during the public health emergency.

Required Items & Services

Q3-Q5 address the type of items and services that are required under the FFCRA and CARES Act, including:

in vitro diagnostic test (meeting certain requirements) for the detection of SARS-CoV-2 or the diagnosis of COVID-19, and the administration of such tests; this includes serological tests for COVID-19, which are used to detect antibodies against the SARS-CoV-2 virus; and
items and services furnished to an individual during health care provider office visits (including in-person and telehealth visits), urgent care center visits, and emergency room visits that result in an order for or administration of an in vitro diagnostic product, but only to the extent the items and services relate to the furnishing or administration of the product or to the evaluation of the individual for purposes of determining the need of the individual for such product.

The required benefits must be furnished during office visits. The Departments construe the term “visit” broadly and include non-traditional care settings, such as drive-through screenings. See Q8.

Additionally, a recent IRS Notice issued just days ago states that testing and treatment for COVID-19 includes “the panel of diagnostic testing for influenza A & B, norovirus and other coronaviruses, and respiratory syncytial virus (RSV) and any items or services required to be covered with zero cost sharing under … the CARES Act.” See IRS Notice 2020-29.

Notice 2020-29 also separately expands Notice 2020-15 to provide that reimbursement of expenses for testing and treatment of COVID-19 incurred on or after January 1, 2020 will not result in a high deductible health plan (HDHP) to fail to be an HDHP under Code section 223.

Cost-Sharing Requirements

Cost-sharing requirements (including deductibles, copayments and coinsurance), prior authorization requirements, and medical management requirements cannot be imposed for benefits that must be provided under section 6001(a) of the FFCRA, as amended by section 3201 of the CARES Act.

With regard to out-of-network providers, Q7 of the Joint FAQs provides that plans and issuers are required to provide coverage for such items and services even if providers have not agreed to accept a negotiated rate as payment in full. In such case, a cash price equal to the service as listed b the provider on a public internet website must be provided (or another amount may be negotiated for less than such cash price).

Summary of Benefits and Coverage (SBC) Requirements & Mid-Year Changes

While material modifications to the SBC normally require that the plan provide 60 days advance notice, the Departments state that they will not take enforcement action regarding greater coverage of COVID-19 diagnosis and/or treatment, as long as plans and issuers provide notice of the changes as soon as reasonably practicable. This non-enforcement policy applies only while the COVID-19 public health emergency and/or COVID-19 national emergency declaration is in affect. Coverage changes beyond this emergency period must fully comply.

State Standards

States may impose additional standards or requirements on health insurance issuers regarding COVID-19 diagnosis or treatment, as long as they do not prevent application of a federal requirement.

Excepted Benefits

The FAQs describe types of excepted benefits, including employee assistance programs (EAPs), and provide that COVID-19 diagnosis and testing offered under an EAP will not jeopardize that EAP’s excepted benefit status while the COVID-19 public health or national emergency declaration is in effect. Additionally on-site medical clinics offering COVID-19 diagnosis and testing will remain excepted benefits.

Telehealth & Remote Care Services

The Departments maintain that widespread use of telehealth and other remote care services are essential to fight the ongoing COVID-19 pandemic, and they strongly encourage all plans and issuers to promote and notify individuals about these services.

The CARES Act has already offered flexibility with regard to high deductible health plans (HDHPs) and health savings accounts (HSAs)… stating that use of telehealth and other remote care services prior to the deductible being met will not jeopardize HDHP status, even if their use is not for COVID-19 related reasons. Moreover, individuals using telehealth or other such services outside of the HDHP may also still contribute to HSAs. The CARES Act amended Internal Revenue Code section 223(c) in this respect and will remain in effect from March 27, 2020 and for plan years beginning on or before December 31, 2021.

However, subsequently released IRS Notice 2020-29, mentioned above, provides that telehealth and other remote care services provided on or after January 1, 2020 (and applying for plan years beginning on or before December 31, 2021) will not affect HDHP status, expanding on the CARES Act which previously applied this rule effective as of March 27, 2020.

Similar to guidance previously stated in these FAQs, plans and issuers who add benefits (or reduce or eliminate cost sharing) for telehealth and other remote care services will temporarily be deemed not to violate notice of material modifications requirements or mid-year change restrictions. The Departments will apply the same non-enforcement policy as described above but only during the emergency declaration and only as long as notice is provided as soon as reasonably practicable.

Participant Communication and Lawsuits

Please keep in mind this is a Department non-enforcement policy and does not protect employers and plans from participant lawsuits.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or bgallagher@fraserlawfirm.com.