Do You Need Employment Practices Liability Insurance?
According to the 2012-2013 Edition of Jury Award Trends and Statistics, the national median award for employment practice claims in 2011 was $325,000, up from $172,500 in 2010. This figure confirms what many in the employment law community already know to be true, that the number of employment practices claims has increased, and with that increase there has been an increase in the size of awards over the years as well. There is no reason to believe that this trend will not continue, and no business should believe itself to be immune from employment practice claims.
Every business of size should seriously consider carrying Employment Practices Liability Insurance (“EPLI”) to protect itself from employment-related claims, which can encompass everything from sexual harassment, to wrongful termination, to defamation. Although a business’s first line of defense should always be thorough up-to-date and well written HR procedures and policies, EPLI coverage can be a valuable lifeline when an expensive and lengthy lawsuit is looming and it just may save your business from financial ruin.
Costs of EPLI policies vary greatly; the price is generally based on your business type, size and associated risk of employment practices. Insurance companies will normally want to review copies of the HR forms, policies, and manuals to assess risk probability. If you seeking EPLI, there are some things you should be looking for in a policy. These include, but are not limited to,
- A broad definition of “insured,” so that all directors, officers, and employees are covered;
- A broad definition of “claim,” so that criminal, civil, and administrative proceedings are covered, as well as arbitrations and investigations;
- A practical deductible that can be met if the insurance is needed;
- A carve-out for claims under federal statutes; if an employee brings a whistleblower claim for exercising rights pursuant to certain statutes such as COBRA, ERISA, or OSHA, you will likely want these claims to be covered by the policy; and
- A choice of counsel provision so that the business can utilize an employment attorney that is familiar with the business, locality, governing law, and particular claim.
As an added bonus, some EPLI insurers even offer additional services free to their customers, such as a call-in line for general employment questions or sample employee handbooks. EPLI can offer peace of mind and valuable protection in the increasingly litigious employment law arena, and the attorneys at McBrayer, McGinnis, Leslie & Kirkland, PLLC, are happy to provide assistance in this area.
Luke A. Wingfield is an associate with McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Wingfield concentrates his practice in employment law, insurance defense, litigation and administrative law. He is located in the firm’s Lexington office and can be reached at lwingfield@mmlk.com or at (859) 231-8780.
This article is intended as a summary of federal law and does not constitute legal advice.
“Why Does She Get To Do That?” Handling Questions about Employee ADA Accommodations
The Americans with Disabilities Act (“ADA”) requires any employer with fifteen or more employees to provide reasonable accommodations to individuals with disabilities, as long as doing so does not result in “undue hardship” to the employer. A reasonable accommodation can be any change in the work place that helps a person with a disability to enjoy equal employment opportunities. The ADA has very strict guidelines about when and how an employer may inquire about an employee’s disability. What happens, though, when a non-ADA employee asks you, the employer, why another employee is receiving perceived preferential treatment?
The ADA strictly prohibits employers from disclosing medical information about employees, but even if privacy rules are adhered to, some accommodations will be obvious to others. For example, consider these situations:
- A diabetic employee takes more scheduled breaks than others so that he can eat small meals.
- An employee with temperature sensitivity is allowed to wear a modified dress code.
- An employee who experiences seizures is receiving a service dog and, as a result, she must leave work to train with the animal for two weeks.
Obvious accommodations that are incorrectly viewed as “special treatment” can lead to an uncomfortable work environment. An ADA-employee may choose to disclose their disability and accommodation(s) with their co-workers, but if they do not, an employer needs to know how to handle the situation.
If confronted with a question about an ADA accommodation, you should generally inform the inquiring employee that you have policies in place for those who may face difficulties in the office. You should not disclose who the person experiencing the disability is (even if it is obvious) or what the disability is. Emphasize that the business, and employees, must respect the privacy of every employee.
In addition, consider what you can do before inquiries start. Although employers are not under an obligation to explain the ADA to employees, it could be beneficial to outline the Act in your employee manual. By doing so, you will help employees become familiar with its rules and regulations. Training is another way to educate your work force. If employees know disability information is confidential, they will be less likely to ask.
You can also designate in your handbook who an employee should speak with in the event an accommodation is needed. Employees may feel as though they have to share their need with the boss, but it is a smart policy to have employees instead discuss the issue with an HR manager or department. HR personnel should be more familiar with the ADA and its requirements. If needed, the HR personnel can then share the information with necessary parties.
The ADA safeguards fairness for all in the work place. By knowing how to discuss the topic appropriately and lawfully, you will ensure that no employee feels slighted by another’s reasonable accommodation, as well as protecting the privacy of the employee requiring the accommodation. As with all employment issues, if a question arises which you or your HR professional is unsure how to answer, contact legal counsel before you act.
Preston Clark Worley is an associate with McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Worley concentrates his practice in employment law, land development, telecommunications, real estate and affordable housing. He is located in the firm’s Lexington office and can be reached atpworley@mmlk.com or at (859) 231-8780.
This article is intended as a summary of state and federal law and does not constitute legal advice.
Are You Going to Play or Pay? Part II
On Monday, we discussed how to determine if you are a “large employer” for purposes of the ACA’s employer mandate. Once you know whether the mandate is applicable, the next step is to know what you will be signing up for if you decide to “play.” The mandate requires you to offer “minimum essential health coverage” that is “affordable” to all full-time employees in 2014. Of course, you need to know what these vague terms really mean. Here’s a general description:
- “Minimum essential health coverage”: The plan must pay at least 60% of the expected health care costs. The remaining 40% may be paid by the employee through co-pays, deductibles, or co-insurance.
- “Affordable”: The employee’s share of the premium for employee-only coverage must not exceed 9.5% of his or her income. Employers must offer dependent coverage, but the cost of this coverage does not factor into the affordability calculation.
Employers are not required to provide coverage for all employees. There is a safe harbor provision so that no penalties will apply for any month in which an employer offers coverage to all but 5% of its full-time employees (or five full-time employees for employers with less than 100 employees). In simple terms, you must offer coverage to 95% of your employees, not all of them.
Likewise, you need to know what you are going to “pay” if you forego providing coverage. Large employers risk extensive penalties, both for failing to offer coverage to their full-time employees and for failing to offer “affordable” coverage to full-time employees and their dependents. If you do not offer coverage, you will face a penalty of $2,000 for every employee in excess of 30. If the coverage offered is not affordable, you risk a penalty of $3,000 for every full-time employee who receives a tax credit or reduction under the new, ACA-created Exchanges.
Before you decide to play or pay, make sure you know the rules of the game. The mandate is detailed, complicated, and comes with costly penalties. Employers must determine which course of action is best for them; many are seeking professional advice. If you need someone to help you understand the mandate and how it will affect you, contact the employment law attorneys at McBrayer, McGinnis, Leslie & Kirkland.
Benjamin L. Riddle is an associate in the Louisville, Kentucky office. Mr. Riddle is a member of the firm’s Litigation team, where he focuses his practice on employment law, commercial disputes and personal injury matters. Mr. Riddle can be reached at (502) 327-5400, ext. 305 or briddle@mmlk.com
This article is intended as a summary of newly enacted federal law and does not constitute legal advice.
Are You Going to Play or Pay?
The Affordable Care Act (“ACA”) includes an “Employer Mandate” that every employer should understand. Although the mandate will not take effect until January 2014, now is the time to learn about it. The mandate requires “large employers” to offer health coverage for “full-time employees” (and their dependents) or pay a penalty tax. The system has become known as “play or pay.” While the requirement may appear quite simple, do not be fooled. It requires a complicated analysis and employers will likely need professional advice to decide whether or not they are going to play or pay in the coming year.
To begin understanding the mandate, you must first know the dividing line between big and small. “Small employers”—those with fewer than 50 “full-time employees”—are not required to provide coverage to any employees and risk no penalties if they choose not to do so.
So, what’s a “full-time employee” for mandate purposes? Full-time employees are those who regularly provide at least 30 hours of service a week, on average. You do not have to provide coverage for employees who are part-time, but the number of hours worked by part-time employees factors into the equation for determining the total number of employees. To determine the total number of “employees” under the act, the total number of house worked by part-time employees in a month must be added together and then divided by 120. This number is added to the number of regular full-time employees for each month. That figure is then divided by 12. So, for example, 40 full-time employees employed 30 or more hours per week plus 20 part-time employees employed 15 hours per week are equivalent to 50 full-time employees. Take a look at the math:
15 part-time hours per week x 4 weeks in a month = 60 hours
60 hours x 20 part-time employees = 1200 hours
1200 hours divided by 120 = 10
40 full-time employees + 10 = 50 “full-time” employees
As you can see, it is possible to have less than 50 full-time employees, but still be subject to the mandate. There are more in-depth regulations for those who are considered joint employers or those who may hire seasonal workers.
The hours used for monthly totals include all hours for which employees are entitled to compensation. Paid sick days, vacation days and maternity leave all must be used. You must look at the twelve months of the preceding calendar year to determine these numbers, but for 2014 employers may choose to use any consecutive 6 month period in 2013.
Now that you know how to determine if the mandate is applicable to you as an employer, check back with us on Wednesday for a continued discussion about the pros and cons of playing or paying.
Benjamin L. Riddle is an associate in the Louisville, Kentucky office. Mr. Riddle is a member of the firm’s Litigation team, where he focuses his practice on employment law, commercial disputes and personal injury matters. Mr. Riddle can be reached at (502) 327-5400, ext. 305 or briddle@mmlk.com
This article is intended as a summary of newly enacted federal law and does not constitute legal advice.
Employers’ deadline to file protective claim for 2009 FICA taxes is April 15, 2013
On September 7, 2012, the Sixth Circuit of Appeals (which encompasses Michigan, Kentucky, Ohio and Tennessee) held in United States v. Quality Stores, Inc. that severance payments to former employees pursuant to an involuntary reduction in work force are not taxable “wages” for purposes of Medicare and Social Security withholding under the Federal Insurance Contributions Act (“FICA”).[1] This affirmed the earlier decision by the Western District Court of Michigan. [2]
Quality Stores was a retailer for farmers and gardeners. In 2001, Quality Stores was forced to close its distribution centers and stores due to its filing bankruptcy. The company offered two different severance plans to employees. Under both plans, each employee received severance pay in accord with his/her years worked and status.
This severance pay was classified by Quality Stores as gross income for tax purposes. Thus, the payments appeared on W-2 forms as “wages.” In addition, Quality Stores withheld federal income tax, paid the employer FICA tax, and withheld the employees’ share of FICA tax. Quality Stores then remitted the FICA taxes. Though it believed severance pay was considered “wages” for withholding purposes, Quality Stores disagreed with the IRS as to whether the severance payments constituted “wages” under FICA – Quality Stores believed it should be considered supplemental unemployment compensation benefits (“SUB pay”) for FICA purposes.
This is not the first time such an issue has been presented to the Court. The Federal Circuit reached the opposite decision in 2008—concluding that SUB pay should be treated as “wages” for FICA purposes.[3] The split in the federal circuits signals that continuing litigation is likely. The U.S. Court of Appeals for the Sixth Circuit denied the government’s petition for rehearing en banc in Quality Stores on January 4, 2013. The government has until April 4, 2013 to file for certiorari in the Supreme Court. If the government seeks Supreme Court review, it may be months before the Supreme Court accepts or denies to hear the case, and the issuance of a final resolution could take years. According to the IRS, there are billions of dollars at stake on this issue.
What does this mean for you as an employer? Quality Stores presents an opportunity for employers in Sixth Circuit states to file FICA tax refund claims for the open years for FICA taxes paid and withheld on SUB pay. Affected employers should act now to protect themselves from the statute of limitations by filing refund claims for all open years. The deadline for filing a protective claim with respect to FICA taxes paid in 2009 is April 15, 2013. Unless the Supreme Court reverses the ruling in Quality Stores, the IRS will be required to start processing refunds for the 6th Circuit taxpayers.
[1] 693 F.3d 605 (6th Cir. 2012)
[2] 424 B.R. 237 (W.D. Mich. 2010)
[3] CSX Corp. v. United States, 518 F.3d 1328 (Fed. Cir. 2008)
Brittany Blackburn Koch, Esq., is an associate attorney practicing in the Lexington office of McBrayer, McGinnis, Leslie & Kirkland, PLLC. She is a native of Pikeville, Kentucky, and a graduate of Centre College and the University of Kentucky College of Law. Ms. Koch’s practice focuses primarily on family law, employment law, criminal law and civil litigation. Ms. Koch has served in numerous public service roles, including representation for Fayette County Bar Association Domestic Violence Pro Bono Advocacy Program. She is actively involved in various organizations and committees, including the Board of Directors for Court Appointed Special Advocates (CASA), Young Professional Committee of Lexington Public Library Foundation, Fayette County and Kentucky Bar Associations, and Centre College Alumni Association.
She may be reached at bkoch@mmlk.com or at (859) 231-8780, ext. 300
This article is intended as a summary of federal law and does not constitute legal advice.
For the Record—What Document Retention Policy Does Your Business Have in Place?
Business owners know that paperwork can be a lot of work. There are personnel files, insurance and benefit records, investigative files, government forms, payroll— and the list seemingly never ends. As a result, it is imperative that employers have a record retention policy in place before a mountain of paperwork overruns the office. All employers, and especially their Human Resources departments, should know not only where to store documents, but also how long to keep them and who is in charge of necessary cataloging.
I recommend that you consider each piece of paper in your business as a piece of evidence that may be needed in the future. In the event of a wrongful discharge case, for example, what records will evidence your action with respect to that employee? In addition, if you do find yourself in court without relevant records, a formal destruction policy that shows why the records are no longer in existence is much less suspicious than an unexplained disappearance.
Each state and federal agency has its own set of document retention timelines. While getting rid of a document before its time can be extremely detrimental, keeping records past the necessary period can lead to messy, overly voluminous files. Records should be streamlined and easy to find; if you have records dating back decades (and no applicable law requires such preservation), you are wasting valuable operating space and perhaps creating a “needle in the haystack” scenario. The best practice is to seek counsel for an individualized policy and specific preservation requirements.
If your current policy does not address electronic documents such as emails, web pages, or social media snippets, then it is time for an updated policy. In addition, new software may be extraordinarily beneficial to preserve electronic data. For example, it is now possible to use electronic imaging to record and store digital records. Online storage of records may cost more and require professional services, but it will save storage room and protect against loss or damage of information in the long run.
Attorneys at McBrayer, McGinnis, Leslie & Kirkland, PLLC, can help employers with the preparation, development, and implementation of a preservation policy or the revision of an existing policy.
Brittany Blackburn Koch, Esq., is an associate attorney practicing in the Lexington office of McBrayer, McGinnis, Leslie & Kirkland, PLLC. She is a native of Pikeville, Kentucky, and a graduate of Centre College and the University of Kentucky College of Law. Ms. Koch’s practice focuses primarily on family law, employment law, criminal law and civil litigation. Ms. Koch has served in numerous public service roles, including representation for Fayette County Bar Association Domestic Violence Pro Bono Advocacy Program. She is actively involved in various organizations and committees, including the Board of Directors for Court Appointed Special Advocates (CASA), Young Professional Committee of Lexington Public Library Foundation, Fayette County and Kentucky Bar Associations, and Centre College Alumni Association.
She may be reached at bkoch@mmlk.com or at (859) 231-8780, ext. 300
This article is intended as a summary of federal law and does not constitute legal advice.
New Administrator’s Interpretation Could Expand FMLA Coverage
Under the Family Medical Leave Act (“FMLA”), eligible employees are provided up to twelve weeks of unpaid, job-protected leave per year. Eligible employees can take FMLA leave for, among other things, the birth and care of a newborn child. Although the FMLA broadly defines a “son or daughter” under this provision to include a “biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis”, it does not expressly confirm whether employees may take leave to care for a son or daughter over the age of eighteen.
In reality, many parents remain the responsible caregiver to an adult child who cannot care for themselves due to a mental or physical disability. For these parents, the age of eighteen does not signal the end of their care duties; indeed, the care they provide may continue for many more decades.
The Department of Labor (“DOL”) recently issued an Administrator’s Interpretation wherein it clarified that FMLA leave may be available for adult sons and daughters. In order to qualify for FMLA leave to care for an adult child, the adult child must; (1) have a disability as defined by the Americans with Disabilities Act (“ADA”), (2) have a serious health condition, (3) be incapable of self care due to his or her disability, and (4) be in need of care due to their health condition.
Prior to issuing this interpretation there was significant debate as to whether the adult child’s disability must have developed before the child reached age 18. The Administrator’s Interpretation now clarifies that the age of onset of the disability is irrelevant. Additionally, the Interpretation reinforces that the ADA, as amended in 2008, must be used to when defining “disability.”
The Administrator’s Interpretation will certainly lead to more leave requests for employees seeking time off to care for adult children with special needs and employers should be prepared to accommodate employees under the new Interpretation. Accordingly, employers would be well-served to review this Administrative Interpretation and to update policies and manuals as necessary to become compliant. In particular, employers should give special attention to ensure that the adult child triggers all four elements before a leave is approved.
W. Chapman Hopkins is an associate with McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Hopkins concentrates his practice in litigation, with a focus on employment, business, and equine law. He is located in the firm’s Lexington office and can be reached at chopkins@mmlk.com or at (859) 231-8780.
This article is intended as a summary of newly enacted federal law and does not constitute legal advice.
