DOL | 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

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

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 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

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.

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.

New York Federal Court Strikes Down Key Provisions of FFRCA Final Rule

In response to a lawsuit by the State of New York, a New York federal district court judge struck down aspects of a U.S. Department of Labor (“DOL”) final rule (the “Rule”) providing guidance on interpretations of the Families First Coronavirus Response Act (FFCRA). The court’s ruling, which was made on August 3, 2020, strikes down the Rule’s “work availability” requirement, the “health care provider” definition, portions of the employer consent requirement for intermittent leave, and the advance documentation requirements for taking FFCRA leave.

It is unclear whether this decision applies only to New York or on a nationwide basis. An appeal of the decision to the U.S. Court of Appeals for the Second Circuit is expected.

Background

The FFCRA, which was enacted on March 18, 2020, requires employers with fewer than 500 employees to provide paid leave due to certain circumstances related to COVID-19 through two separate provisions: the Emergency Paid Sick Leave Act (“EPSLA”) and the Emergency Family and Medical Leave Expansion Act (“EFMLA”).

The EPSLA applies to virtually all private employers with fewer than 500 employees and to virtually all public agencies employing one or more employees. Under section 5102(a) of the EPSLA, employers shall provide employees with paid sick time if they are unable to work (or telework) due to a need for leave because:

The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
The employee has been advised by a health care provider to self-quarantine due to concerns relating to COVID-19;
The employee has COVID-19 symptoms and is seeking a medical diagnosis;
The employee is caring for an individual subject to quarantine or isolation or advised to self-quarantine as described in paragraphs (1) or (2) above;
The employee is caring for his/her child if the school or place of care has been closed or the child care provider is unavailable due to COVID-19 precautions; and
The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

Pursuant to the EFMLEA, which is a temporary amendment to the Family and Medical Leave Act (FMLA), eligible employees (those employed for 30 calendar days or longer) receive up to 12 workweeks of leave to care for their child whose school or place of care has been closed, or whose childcare provider is unavailable, due to COVID-19 precautions.

On April 1, 2020, the DOL issued the Rule implementing and interpreting the FFCRA. On April 14, New York filed a complaint for declaratory and injunctive relief against the DOL and the Secretary of Labor in the U.S. District Court for the Southern District of New York, and moved for summary judgment.

Work Availability Requirement Under the FFCRA

The Rule clarified that employees are not entitled to paid leave under the FFCRA if their employers “do not have work” for them to do. This “work availability” requirement was significant because, as the district court explained, COVID-19 has caused the temporary shutdown or slowdown of many businesses nationwide, resulting in a decrease in work available to employees.

In its complaint, New York asserted that “[t]he Final Rule imposes a new ‘work availability’ requirement that permits employers to deny their workers emergency family leave or paid sick leave, with no statutory basis.” The DOL argued that the Rule is consistent with the statute because employees are not “unable to work (or telework)” (due to one of six reasons listed above) if their employer has no work available for them to perform.

The Court disagreed, concluding that the work availability requirement exceeded the DOL’s authority because it applied only to three of six qualifying reasons for EPSLA leave, which the court found inconsistent with the language of the FFCRA. The court also found the DOL’s “barebones explanation” for the work availability requirement to be “patently deficient,” particularly in light of its “enormously consequential” impact of narrowing the scope of the FFCRA.

Definition of “Health Care Provider”

The FFCRA permits employers to exclude a “health care provider or emergency responder” from paid leave benefits. New York argued that the Rule’s definition of a “health care provider” exceeds the DOL’s authority under the FFCRA. The DOL defined “health care providers” as employees of a broad group of employers, including, in part, anyone employed at “any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institutions, Employer, or entity.”

The court determined that the FFCRA “unambiguously forecloses” the DOL’s definition. The court found the definition to be “vastly overbroad” because it included individuals whose roles bore “no nexus whatsoever” to the provision of healthcare services and “who were not even arguably necessary or relevant to the healthcare system’s vitality.”

Intermittent Leave Provisions

The Rule permits employees to take leave intermittently (i) upon agreement between the employer and employee and (ii) only for a subset of qualifying conditions. New York took issue with both aspects of the Rule. The court upheld the DOL’s limitation of leave to qualifying reasons that are not logically correlated with a higher risk of viral infection. However, the court determined that the DOL “utterly fails to explain why employer consent is required for the remaining qualifying conditions.” Therefore, the district court vacated the requirement for employer consent.

Documentation Requirements

New York also challenged the Rule’s requirement that employees submit to their employer, prior to taking FFCRA leave, documentation explaining their reason for leave, the duration of leave, and, to the extent relevant, the authority for the isolation or quarantine order qualifying them for leave.

The district court noted that the FFCRA contains notice requirements but no documentation requirement for taking leave. It concluded that the requirement that employees furnish documentation in advance of leave imposed different and more onerous standards inconsistent with the FFCRA’s unambiguous notice provisions. The district court stated: “The documentation requirements, to the extent they are a precondition to leave, cannot stand.”

Conclusion

As noted above, it is unclear whether this decision applies only to New York or has nationwide impact. We will continue to monitor and keep you informed as to further developments, which could include an appeal of the decision or new guidance being issued by DOL. If you have any questions about this case, or FFCRA issues more broadly, please contact 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.

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.

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.

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.

Client Alert: New Model COBRA Notices Issued by DOL

Along with other recent changes, including the delay of COBRA deadlines and premium payments (see our Client Alert: Major Extension of Employee Benefit Plan Deadlines Due to COVID-19 Outbreak), the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) released new model notices that employers may use to comply with the notice obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). A News Release as well as frequently asked questions (FAQs) were also posted.

These revised general and election model notices provide additional information regarding the interaction between COBRA and Medicare. While no legal changes are referenced, a new paragraph explains to employees that there may be advantages to enrolling in Medicare before, or instead of, electing COBRA.

Along with a few other small revisions, the model notices insert a new section addressing whether an individual can enroll in Medicare instead of COBRA, the timeframe for doing so, and the potential penalties for waiting to enroll in Medicare Part B. The new section also describes the priority of payment if both COBRA and Medicare are elected.

Employers should ensure their COBRA notices are updated to include these revisions.

Notably, these new notices do not address the extension of time to elect COBRA or to pay for COBRA during the coronavirus Outbreak Period. (See our Client Alert: Major Extension of Employee Benefit Plan Deadlines Due to COVID-19 Outbreak). Employers are not required to provide COBRA election notices during the Outbreak Period, and individuals are not required to elect or pay for COBRA during the Outbreak Period. Separately, in its recent FAQs (accompanying the Joint Notice that extends COBRA deadlines, among others), the EBSA reminds individuals that if employer coverage is lost, Marketplace coverage is another alternative, and it may be more affordable than COBRA. The FAQs review the Marketplace’s special enrollment periods (which have not been extended).

Issues regarding communication of all these changes will emerge quickly.

Important Note: While the Department of Labor considers use of these model notices by employers to be good faith compliance, it is important to remember that participant and qualified beneficiary litigation may still ensue. These model notices do not address numerous other important circumstances, such as limited application of COBRA continuation for most underspent health FSAs. Additionally, it is recommended that the general notices contain information on how an individual must provide notice of a qualifying event (such as whether oral notice or electronic notice will be accepted) and what information must accompany the notice of qualifying event.

With all the continual changes, it is important to be in contact with your employee benefits advisors and counsel. 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.

FFCRA: DOL Latest Guidance Alters Action Plans of Many Employers

After the passage of the Families First Coronavirus Response Act (FFCRA) and the initial round of Department of Labor (DOL) guidance issued last week, employers began developing action plans on how to deal with their workforce amid a continually changing landscape, including numerous State orders requiring schools and businesses to close and for individuals to “stay at home.”

The Emergency FMLA Expansion Act and the Emergency Paid Sick Leave Act (Acts) are being carefully considered, and employers are preparing to offer these benefits to employees in numerous situations. For more detailed information on these Acts, which are set forth under the FFCRA, please see our previous Client Alert.

However, late last week, the DOL updated its initial list of 14 FAQs with an additional 23 new questions and answers. The updated DOL guidance can be found here: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions. Moreover, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on Friday which modifies certain provisions of the FFCRA. These matters are set forth below.

EPSLA: Worksites Closing Due to Shelter In Place Orders Will Not Qualify for Paid Sick Leave

Under the Emergency Paid Sick Leave Act (EPSLA), one of the reasons an employer must provide employees with paid sick time is if they are unable to work (or telework) due to a need for leave because:

The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;

With respect to recent “shelter in place” or “stay at home” orders issued by certain States, employers were preparing to offer leave when sending their employees home. However, late last week in its updated list of FAQs, the DOL clarified that if an employer closes its worksite and/or sends employees home for lack of work, even if due to State directives, paid sick leave will not be warranted.

Questions and Answers #23 and 24 state that if an employer closes its worksite, either before or after April 1, 2020 when the Acts become effective, leave under the Acts is not warranted during the period of closure. Significantly, it goes on to state:

This is true whether your employer closes your worksite for lack of business or because it is required to close pursuant to a Federal, State, or local directive.

Instead, employees are encouraged to contact their State workforce agency or unemployment insurance office to answer questions about eligibility.

Question and Answer #25 also states that paid sick leave or expanded family and medical leave already being provided will stop as of the date the employer closes its worksite.

Moreover, the DOL guidance addresses circumstances of employers who remain open but furlough employees due to lack of work. That also does not qualify under the Acts. See Question and Answer #26:

If my employer is open, but furloughs me on or after April 1, 2020 (the effective date of the FFCRA), can I receive paid sick leave or expanded family and medical leave?

No. If your employer furloughs you because it does not have enough work or business for you, you are not entitled to then take paid sick leave or expanded family and medical leave. However, you may be eligible for unemployment insurance benefits. You should contact your State workforce agency or State unemployment insurance office for specific questions about your eligibility. For additional information, please refer to https://www.careeronestop.org/LocalHelp/service-locator.aspx.

Question and Answer #27 addresses what happens if a worksite closes and then later reopens. Leave may only be available when the worksite is open.

Question and Answer #28 discusses availability of leave for reduced hours. Again, not having enough work for an employee to do does not qualify; however, an employee who is unable to work his/her full schedule due to a COVID-19 qualifying reasons is entitled to leave under the Acts.

Employees Must be Unable to Conduct Work that Employers Have for Them To Do

The DOL guidance states that the employer must have work for employees to do, and the employee must be unable to work or telework for one of the COVID-19 specified reasons to be entitled to leave under the Acts. See Question and Answer #18:

What does it mean to be unable to work, including telework for COVID-19 related reasons?

You are unable to work if your employer has work for you and one of the COVID-19 qualifying reasons set forth in the FFCRA prevents you from being able to perform that work, either under normal circumstances at your normal worksite or by means of telework.

If you and your employer agree that you will work your normal number of hours, but outside of your normally scheduled hours (for instance early in the morning or late at night), then you are able to work and leave is not necessary unless a COVID-19 qualifying reason prevents you from working that schedule.

Documentation Requirements for Leave Taken Under the Acts

While the Acts did not list any documentation or substantiation requirements for entitled leaves, the DOL provides guidance in Question and Answer #15:

What records do I need to keep when my employee takes paid sick leave or expanded family and medical leave?

If one of your employees takes paid sick leave under the Emergency Paid Sick Leave Act, you must require your employee to provide you with appropriate documentation in support of the reason for the leave, including: the employee’s name, qualifying reason for requesting leave, statement that the employee is unable to work, including telework, for that reason, and the date(s) for which leave is requested. Documentation of the reason for the leave will also be necessary, such as the source of any quarantine or isolation order, or the name of the health care provider who has advised you to self-quarantine. For example, this documentation may include a copy of the Federal, State or local quarantine or isolation order related to COVID-19 applicable to the employee or written documentation by a health care provider advising the employee to self-quarantine due to concerns related to COVID-19. If you intend to claim a tax credit under the FFCRA for your payment of the sick leave wages, you should retain this documentation in your records. You should consult Internal Revenue Service (IRS) applicable forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.

If one of your employees takes expanded family and medical leave to care for his or her child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19, under the Emergency Family and Medical Leave Expansion Act, you must require your employee to provide you with appropriate documentation in support of such leave, just as you would for conventional FMLA leave requests. For example, this could include a notice that has been posted on a government, school, or day care website, or published in a newspaper, or an email from an employee or official of the school, place of care, or child care provider. This requirement also applies when the first two weeks of unpaid leave run concurrently with paid sick leave taken for the same reason. If you intend to claim a tax credit under the FFCRA for the expanded family and medical leave, you should retain this documentation in your records. You should consult IRS applicable forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.

Question and Answer #16 sets forth the records that an employee must provide an employer.

Other DOL FAQ Highlights

The updated FAQs address numerous other circumstances, including:

Intermittent leaves under the Acts while teleworking
Intermittent leaves under the Acts while working at employer’s worksite
Continuation of group health plan coverage
Interaction of employer paid time off policies with leave rights under the Acts
Unavailability of tax credits for amounts employers pay in excess of the Acts’ requirements
Whether leaves under the Acts can be taken in conjunction with unemployment insurance
How employers who are part of a multiemployer collective bargaining agreement can satisfy their obligations under the Acts

Again, for the full DOL questions and answers, please see: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions.

How the CARES Act Affects Leave Entitlements under the FFCRA

The FFCRA was also modified slightly by the CARES Act, which was enacted on Friday, March 27, 2020. Changes include:

Under the FMLA Expansion Act, employees who have been employed for at least 30 calendar days by the employer are eligible for the leave if they have a qualifying need related to a public health emergency. The CARES Act adds a provision for rehired employees, including in the definition of “eligible employee” the following:
- an employee who was laid off by that employer not earlier than March 1, 2020, had worked for the employer for not less than 30 of the last 60 calendar days prior to the employee’s layoff, and was rehired by the employer.
With respect to tax credits under the FMLA Expansion Act and the Emergency Paid Sick Leave Act, the CARES Act amends the FFCRA to provide for advancing credits, up to the amount of the tax credit allowed, calculated through the end of the most recent payroll period in the quarter. Forms and instructions regarding this advanced credit will be forthcoming.

FFCRA Poster Reminder

The DOL also updated its questions and answers regarding the FFCRA poster requirements. Specifically, it added guidance clarifying that the notice must be “posted” by April 1, 2020. See https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions.

Again, the poster can be found here: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf.

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.

CARES Act Relaxes Rules Regarding 2020 Retirement Plan Distributions

On Friday, the House of Representatives passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in dramatic fashion, with several members racing back to Washington after Representative Thomas Massie threatened to demand a recorded vote. The legislation (which had been previously passed on a unanimous vote by the Senate earlier in the week) was signed by President Trump shortly thereafter.

The CARES Act is the third extensive—roughly $2 trillion dollar—emergency relief package with numerous components designed to mitigate the rapid and sudden fallout from the COVID-19 pandemic. Among its 880 pages are a few changes that loosen the requirements applicable to distributions from retirement plans for 2020:

Retirement plans may permit individuals to take a “coronavirus-related distribution” of up to $100,000 in 2020, which will be exempt from the 10% early distribution penalty. In addition, individuals taking such distributions may pay tax on them ratably over three years and may repay them within a three-year period. Individuals will be eligible for such a distribution if they (or their spouse or dependent) test positive, or if they experience adverse financial consequences as a result of COVID-19 due to being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care, or closing or reducing hours of a business owned or operated by the individual (a “qualified individual”). A plan administrator may rely on a participant’s certification that he or she is a qualified individual. Plans that may offer these distributions include qualified defined contribution plans, 403(b) plans, governmental 457(b) plans, and IRAs. Although more clarification would be welcome, these rules are structured similarly to the new “qualified birth or adoption” rules under the recently-passed SECURE Act. As such, the availability of these distributions appears to be an optional plan provision.
With respect to participant loans taken within 180 days following passage of the CARES Act, the limits on permissible plan loans has been increased from $50,000 to $100,000 and from half of the participant’s vested account balance to the entire vested account balance. In addition, with respect to any qualified individual (as defined in the previous bullet) with an outstanding loan, any payments due during the remainder of 2020 are delayed by one year. It is our understanding that offering loans up to the increased limits is optional (as is offering loans at all); whether plan sponsors will be required to offer delayed repayment to affected individuals is less clear, but this aspect is likely mandatory.
Required minimum distributions (RMDs) are waived for 2020. This includes individuals who attained age 70½ in 2019 and did not take their first RMD prior to January 1, 2020. Impacted plans again include qualified defined contribution plans, 403(b) plans, governmental 457(b) plans, and IRAs. Though more guidance is needed on implementation, we expect this temporary waiver to operate similarly to the 2009 waiver under WRERA. If that is the case, plan sponsors would be able to determine whether they would offer the 2020 RMD waiver, and if so, what the default will be (i.e., to receive or not receive an RMD).

The CARES Act includes a delayed amendment deadline for the above changes set at the last day of the plan year beginning on or after January 1, 2022 (i.e., December 31, 2022 for calendar year plans). Governmental plans have two additional years.

Along with the above changes, the CARES Act contains some funding relief for sponsors of qualified defined benefit plans. Specifically, the Act delays minimum funding contributions otherwise due during calendar year 2020 until January 1, 2021 (though delayed contributions will be subject to an interest adjustment). In addition, the CARES Act permits plan sponsors to elect to treat the AFTAP for the last plan year ending before January 1, 2020 as the AFTAP for plan years which include calendar year 2020. This will help many plans avoid funding-based benefit limitations (including the inability to pay lump sums) that might otherwise come into play.
Finally, the CARES Act provides authority for the DOL to delay ERISA filing deadlines due to public health emergencies. Though the Act itself does not provide any delay, we anticipate that forthcoming DOL guidance will do so.

If you have any questions on how the CARES Act (or any other COVID-19 developments) may impact your organization’s retirement plans, please contact Brian Gallagher at bgallagher@fraserlawfirm.com.