Saturday, March 27, 2010

IF YOU BUILD IT THEY WILL COME: Tax Benefits for Employers Hiring New Employees

By Jessica Tucci

President Obama signed H.R. 2847- the Hiring Incentive to Restore Employment (HIRE) Act- into law on March 18, 2010. HIRE amends the Internal Revenue Code by providing two new tax benefits to employers hiring unemployed workers. The first tax benefit essentially exempts employers from paying their share of Social Security taxes (or 6.2%) on wages paid to newly hired employees after March 18, 2010. Employers still must pay their share of Social Security taxes from new hires and then claim the payroll tax benefit on their 2010 federal employment tax returns. The second tax benefit affords employers a general business tax credit of up to $1,000 per new employee if the employer retains the new employee for at least one year.

Tax benefits are not automatic. The employer must be a business, agricultural employer, tax-exempt organization or public college or university. Household employers do not qualify for the tax benefits. Employers must hire new employees between February 3, 2010 and January 1, 2011, and the new employee must fill a newly added position or a position that was previously occupied by an employee that voluntarily left or was terminated for cause. Finally, employers must obtain a form from the new employee attesting that he or she was unemployed for the 60 days prior to starting work or worked less than 40 hours total for a different employer during the 60 days prior to starting work. The Internal Revenue Service will post the new tax provisions and the required form in the coming weeks at www.irs.gov.

Thursday, March 25, 2010

Ohio Supreme Court Upholds Ohio's Employer Intentional Tort Statute

*By George S. Crisci

For almost three decades, the Ohio General Assembly has attempted to limit an employee’s ability to sue an employer on grounds that the employer’s intentional actions caused a workplace injury or occupational disease. The Ohio Supreme Court has struck down no fewer than three such pieces of legislation as unconstitutional since 1982. In the absence of a limiting statute, Ohio common law has allowed such “employer intentional tort” suits to proceed outside the workers’ compensation system. As a result, juries have often found employers subject to increased liability for workplace injuries based, for all practical purposes, on little more than negligence.

The General Assembly’s string of failed attempts was broken when the Ohio Supreme Court issued two companion decisions on March 23, 2010, ruling that Ohio Revised Code Section 2754.01, which limits an employee’s ability to sue an employer for an intentional tort, did not violate the Ohio Constitution.

The statute, passed in 2005, provides that an employer is immune from liability when sued by employees or their dependent survivors for an intentional injury unless the plaintiff proves that the employer acted with the “intent to injure the employee” or “with the belief that the injury was substantially certain to occur.” The statute defines the phrase “substantially certain” as meaning that “an employer acts with deliberate intent to cause an employee to suffer an injury, a disease, a condition, or death.” The statute further provides that an employer’s deliberate removal of equipment safety guards or deliberate misrepresentation of a toxic or hazardous substance creates a rebuttable presumption that these actions were committed with the intent to injure another.

In Kaminski v. Metal & Wire Products Company, 2010-Ohio-1027, the Ohio Supreme Court found that R.C. §2745.01 did not violate Sections 34 (authorizing employment workplace laws) and 35 (authorizing workers’ compensation laws) of Article II of the Ohio Constitution. Specifically, the Court held that those provisions granted the General Assembly broad authority to enact legislation and did not prohibit limitations on employer intentional torts. The Court further explained that because R.C. §2745.01 merely limits, but does not eliminate, an employee’s ability to sue an employer for intentional tort, it is constitutional.

In Stetter v. R.J. Corman Derailment Services, LLC, 2010-Ohio-1029, the Ohio Supreme Court further established the constitutional validity of R.C. §2745.01. Responding to issues referred to it by a federal court, the Ohio Supreme Court ruled that the statute does not on its face violate a number of the Ohio Constitution’s provisions including those concerning access to the courts, the right to a jury trial, and equal protection under the law. Notably, the Ohio Supreme Court explained that while R.C. §2745.01 does not eliminate the common-law cause of action for an employer intentional tort, it does significantly limit an employee’s ability to bring such an action.

Thus, for the first time in almost 30 years, the Ohio Supreme Court has denied a challenge to limits on the employer intentional tort. As a result, employers face reduced risk that an employee can successfully seek to recover for workplace injuries and/or occupational diseases outside the limits of the workers’ compensation system. Most importantly, it is now easier for employers to defend against meritless intentional tort lawsuits and the sizeable damage awards or settlements that flow from them.

If you have any questions how the unemployment benefits extension may affect your business, please contact George S. Crisci at 216.696.4441 or gsc@zrlaw.com.

*George S. Crisci is an OSBA Certified Specialist in Labor and Employment Law and has extensive experience in all aspects of workplace law. For more information about defending allegations of public policy discrimination, please contact George at 216.696.4441 or gsc@zrlaw.com.

Wednesday, March 24, 2010

Health Care Reform Legislation Passes the House and Is On Its Way to the President – What Does It Mean for Employers?

*By Patrick J. Hoban

Last night, the U.S. House of Representatives passed the “Patient Protection and Affordable Care Act” – H.R. 3590 (the “Senate Bill”) – by a vote of 219-212. The U.S. Senate passed the identical bill on December 24, 2009, and, after President Obama signs the bill, it will become law. Supporters claim that the bill’s combination of taxes, regulations, and health insurance subsidies will result in “comprehensive” reform of health care in the United States. Opponents counter that the bill’s provisions are too costly and that its regulations will only serve to drive up the cost of health care and reduce access.

Among the Senate Bill’s many terms are provisions requiring employers employing more than 50 employees to pay an “assessment” to the federal government when one of its full-time employees is eligible for government health care subsidies based upon their compensation as a percentage of the Federal Poverty Limit. The Senate Bill defines “Full-Time” as any employee who works at least an average of 30 hours per week as determined by regulations to be issued by the Secretary of Health and Human Services in consultation with the Secretary of Labor. The Senate Bill also includes the following provisions which take effect on January 1, 2014:
  • Employers who do not offer health care coverage meeting federal minimal essential coverage standards are required to pay the federal government a flat dollar amount per full-time employee;

  • Employers who do offer health care coverage meeting federal minimal essential coverage standards are required to pay either $3,000.00 per subsidy-eligible employee or a flat dollar amount per each full-time employee, which ever is less;

  • Employers who impose a waiting period before employees can enroll in employer provided health coverage are required to pay $400.00 per employee for 30-60 day waiting periods and $600.00 per employee for 60-90 day waiting periods;

  • Employers who provide health care coverage meeting federal minimal essential coverage standards to their employees must provide a voucher equal to the employer’s cost of providing such coverage to employees whose income is less than 400% of the Federal Poverty Limit (e.g., $88,050.00 for a family of four) if the employee’s share of health insurance premiums is between 8% and 9.8% of their income and the employee chooses insurance coverage through a federal health insurance exchange.

  • Employers must automatically enroll all employees for health care coverage, but employees may opt out of coverage.
In addition to the foregoing provisions, the Senate Bill also provides small employers with tax credits for offering their employees health care coverage. In tax years 2010-2013, employers with fewer than 25 employees and average annual wages of less than $50,000.00 may take a tax credit of up to 35% of employee health premiums if the employer pays at least 50% of the premium for minimal essential coverage. Additionally, until January 1, 2014, the federal government will reimburse employers who provide health insurance coverage for retirees over the age of 55 years but not Medicare-eligible for up to 80% of retiree health insurance claims up to $90,000.00. Reports indicate the President will sign the Senate Bill today or tomorrow.

Importantly, in addition to passing the Senate Bill, last night, the House also passed the “White House/Congressional Leadership Reconciliation Bill Health Care and Education Affordability Act of 2010” – H.R. 4872 (the “Reconciliation Bill”) by a vote of 220-211. The Reconciliation Bill contains a series of amendments to the Senate Bill and will have to get through the reconciliation process with at least 51 votes (as President of the Senate, Vice President Joe Biden can break any ties) and be signed by the President before becoming law. Importantly, the Reconciliation Bill changes some of the employer-specific provisions contained in the Senate Bill. The Senate is expected to take up the Reconciliation Bill this week.

In addition to the President’s signature, full implementation of the Senate Bill will require regulatory guidance from the Internal Revenue Service, the Department of Health and Human Services, and the Department of Labor. However, all employers should consult with their health insurance brokers, tax advisers, and review collective bargaining agreements to develop a strategy that allows them to best adapt to the drastically changed national health insurance landscape.

*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about the effect of recent health care legislation on employers, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.

Wednesday, March 10, 2010

President Obama Signs H.R. 4691 Extending Unemployment and ARRA COBRA Subsidy Benefits Through March 31, 2010

*By Patrick J. Hoban

On March 2, 2010, President Obama signed H.R. 4691 – the “Temporary Extension Act of 2010” (the “Act”) into law. The Bill, which became Public Law 111-144, provides short-term extensions of several authorities, including those related to: (1) unemployment compensation; (2) ARRA COBRA premium subsidies; (3) Medicare physician payments; (4) Medicare therapy caps; (5) surface transportation programs; (6) flood insurance programs; (7) retransmission of television broadcasts; (8) Federal poverty guidelines; and (9) Small Business Administration loan guarantees.

In addition to extending the ARRA COBRA premium subsidies to individuals who become eligible through March 31, 2010, the Act clarifies the eligibility of individuals who lose group health insurance coverage due to the reduction in hours of an employee. The Act specifies that the loss of group coverage due to a reduction in hours only triggers eligibility for COBRA continuation coverage but not the ARRA COBRA subsidy. However, an individual who loses group coverage due to a reduction in hours and is later involuntarily terminated is entitled to elect ARRA COBRA coverage at the time of his or her involuntary termination.

Importantly, per the “clarification” set forth in the Act and as confirmed by the Employee Benefits Security Administration (“EBSA”), the total period for COBRA continuation coverage eligibility (with or without the ARRA premium subsidy) initially extends for 18 months from the triggering event (i.e., loss of group coverage due to an hours reduction or termination of employment). Currently, the ARRA COBRA premium subsidy extends for 15 months from the date of involuntary termination. However, EBSA has confirmed that the ARRA COBRA premium subsidy does not extend the period of COBRA continuation entitlement. Thus, when a covered individual loses group coverage due to a reduction in hours, the clock starts ticking on his or her COBRA continuation eligibility. If that employee is later involuntarily terminated, he or she will be entitled to elect the ARRA COBRA premium subsidy but that election will not extend the period of COBRA continuation coverage to which he or she is entitled.

Although the Act only extended the ARRA COBRA premium subsidy to eligible individuals through March 31, 2010, there are currently two bills pending in the U.S. Congress that would extend the premium subsidies through June 30, 2010. Employers should expect Congress to take further action on COBRA within the month.

*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about this legislation or other ARRA COBRA or COBRA issues, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.

Thursday, March 4, 2010

U.S. Senate Passes Extension of ARRA COBRA Subsidy and Unemployment Benefits Through March 31, 2010

*By Patrick J. Hoban

On November 6, 2009, President Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009, which extended unemployment insurance benefits by 14 weeks in all states and 20 weeks in states experiencing higher average rates of unemployment (8.5% over a three-month period).

Then, on December 19, 2009, President Obama signed into law the 2010 Defense Department Appropriations Act (“DDAA”). The DDAA extended COBRA subsidies created by the American Reinvestment and Recovery Act (“ARRA”) and extended the COBRA subsidy eligibility period from December 31, 2009 to February 28, 2010 for individuals who involuntarily lost their employment and group health insurance coverage after September 1, 2008. DDAA also expanded the period of the COBRA subsidy from 9 to 15 months and required administrators of covered group health insurance plans to provide notice of extended COBRA benefits.

On March 2, 2010, the U.S. Senate passed H.R. 4691 which extends the ARRA COBRA subsidy through March 31, 2010. The U.S. House passed the bill on February 25, 2010 by unanimous voice vote but its passage in the Senate was delayed by questions over how the Congress would pay its $10 Billion cost. With the withdrawal of a procedural challenge by Kentucky Senator Jim Bunning in exchange for an agreement to vote on a separate measure to fund the bill, the Senate passed the H.R. 4691 without amendment by a vote of 78 to 19. Once signed by the President, the bill will become law.

In addition to extending the ARRA COBRA subsidy through March 31, 2010, H.R. 4691 clarifies entitlement to the subsidy for employees who become eligible for COBRA due to a loss of group health coverage resulting from a reduction in hours of work. Group plan sponsors must notify employees whose reduction in work hours entitles them to COBRA benefits and they will have 60 days to elect COBRA coverage. The bill further provides that employees eligible due to a reduction in hours who are later involuntarily terminated are entitled to a second notice of COBRA eligibility and 60-day election period. Notably, H.R. 4691 states that such an employee’s 15-month period of ARRA COBRA subsidy entitlement runs from the commencement of the initial eligibility created by the reduction in hours. Specific H.R. 4691 compliance assistance for employers will be forthcoming from the Employee Benefits Security Administration after it becomes law and will be available at http://www.dol.gov/ebsa/COBRA.html.

H.R. 4691 also extends unemployment benefits by an additional 13 weeks in states experiencing higher average rates of unemployment, – the fourth such extension since the beginning of the recession in December 2007 – continues funding to employ approximately 2,000 Department of Transportation employees, and delays a scheduled 21% reduction in Federal Government Medicare payments to physicians.

Although the current ARRA COBRA subsidy extension will expire on April 1, 2010, Z&R has previously that there are currently two separate bills before Congress - S2730 and H.R. 2847 - which would extend the subsidy through June 30, 2010.

*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about this legislation or other ARRA COBRA or COBRA issues, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.