Department of Labor Release Model COBRA Notices

By Rick A. Hanrahan

On February 17, 2009, the President signed the American Restoration and Recovery Act (“the Act”) into effect. The Act makes significant changes to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), and mandates that plans notify assistance-eligible individuals (e.g. certain employees and qualified beneficiaries) of their COBRA rights to receive a 65% subsidy on their premium payments.

The Department of Labor (“DOL”) just recently issued its model notices to help plans and individuals comply with COBRA’s new requirements. Each model notice is designed for a particular group of assistant-eligible individuals and contains information to help satisfy the Act’s notice requirements.

The three notices include: (1) a general notice (full and abbreviated version); (2) alternative notice; and (3) notice in connection with extended election periods.

The general notice should be used for assistance eligible individuals who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. The full version includes information on the premium reduction as well as information required in a COBRA election notice. The abbreviated version includes the same information as the full version regarding the availability of the premium reduction and other rights under the Act, but does not include the COBRA coverage election information. The abbreviated version may be used in lieu of the full version for individuals who experienced a qualifying event during, on, or after September 1, 2008, already elected COBRA coverage, and still have coverage.

The alternative notice should generally be used by insurance issuers that provide group health insurance coverage to persons who became eligible for continuation coverage under a state law.

The notice in connection with extended election periods should be used for individuals who: (1) had a qualifying event at any time from September 1, 2008 through February 16, 2009; and (2) Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA. Employer must provide this notification by April 18, 2009.

Failure to provide proper notice to assistant eligible individuals could subject the employer or plan to a penalty of up to $110 per day under ERISA § 502(c)(1) and/or other penalties.

To retrieve the DOL’s model notices, go to:
http://www.dol.gov/ebsa/COBRAmodelnotice.html.

For more details on the changes to COBRA read our firm’s prior alerts:
“The COBRA Clutch: The Stimulus Bill Alters COBRA"; and “IRS Releases Updated Form 941 For Employers To Report Cobra Premium Assistance Payments”.

As always, do not hesitate to contact our certified employment attorneys at Zashin & Rich for further details.

Ohio Court Holds Ohio Law Trumps Title VII For Pregnancy

By Lois A. Gruhin

The Fifth Appellate District recently held in Nursing Care Mgt. of Am., Inc. v. Ohio Civ. Rights Comm., 2009-Ohio-1107, that an employer violated R.C. 4112.02 by denying leave to a pregnant female employee who had not satisfied the employer’s 12 month length of service requirement.

The employer had a facially-neutral leave policy that provided 12 weeks of available leave, but required one-year of service before any employee was entitled to it. The plaintiff/employee had given her employer a doctor's note placing her off work for 6 weeks due to pregnancy, approximately a week before her due date. Three days after she had given birth, and about 10 days after submitting the doctor's note, the employer discharged her because she had not worked for a full year, as required under the employer’s policy.

The OCRC found probable cause for pregnancy discrimination based on O.A.C. 4112-5-05(G)(2). (G)(2) makes it unlawful sex discrimination to discharge an employee "who is temporarily disabled due to pregnancy" and that discharge "is caused by an employment policy under which insufficient or no maternity leave is available."

The employer argued that these regulations went beyond what was provided for by existing interpretations of the federal Pregnancy Discrimination Act (PDA), and that the Ohio Supreme Court had directed Ohio courts to apply federal interpretations of the PDA. The employer also argued that its act was justified under subdivision (G)(5), which permits enforcement of "length of service" requirements under certain circumstances.

The Fifth District held that while Ohio courts were indeed to apply federal interpretations of Title VII where the language of the Ohio act is comparable, Title VII and the PDA were not preemptive ceilings, and the Ohio act was not necessary equivalent to the federal act, but only "similar to" it. Specifically, the court cited the U.S. Supreme Court's opinion in California Fed. Sav. & Loan Assn. v. Guerra (1987), 479 U.S. 272, which held that "Title VII does not preempt a state law that guarantees pregnant women a certain number of pregnancy disability leave days, because this is neither inconsistent with nor unlawful under Title VII." The court pointed out that that R.C. 4112.08 also requires that R.C. Chapter 4112 "shall be construed liberally for the accomplishment of its purpose." In the end, the court determined that O.A.C. 4112-5-05(G)(2) trumps (G)(5), and that maternity leave must be provided for a “reasonable period of time.”

This illustrates that under Ohio Law employers who fail to provide all pregnant employees a reasonable amount of maternity leave regardless of the employers leave policy do so at their own peril. The issue is what constitutes a “reasonable period of time” for pregnancy/maternity leave. The Ohio Civil Rights Commission has taken the position in its technical policy T-29 that a leave policy providing a minimum of at least 12 weeks of pregnancy/maternity leave for women affected by pregnancy, childbirth or a related medical leave, that is applied regardless of length of service, is presumed to be reasonable and sufficient. However, the reasonableness and sufficiency of a leave policy may be rebutted based on the past practices of the employer, the employer’s business necessity, the type of work involved and other relevant factors. Remember that in some instances due to medical necessity, a reasonable period of leave could require more than a 12 week leave period.

The Court’s opinion appears to lay the groundwork for the OCRC to use R.C. 4112.08 (which has no federal counterpart) as the basis for distinguishing R.C. Chapter 4112 from federal Title VII/ADA/ADEA law, and issue regulations that carry employers' obligations under R.C. Chapter 4112 far beyond anything required by federal law – all without any action by the General Assembly.

IRS Releases Updated Form 941 For Employers To Report Cobra Premium Assistance Payments

By Richard A. Hanrahan

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (“the Act”) into law. The Act makes significant changes to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), and allows certain assistance-eligible individuals of COBRA the right to receive a 65% subsidy on their premium payments.

In particular, assistance-eligible employees, involuntarily terminated between September 1, 2008 and December 31, 2009, must pay 35% of the COBRA premium, while employers must pay the remaining 65%. However, employers may recover the 65% subsidy provided to assistance-eligible individuals by completing the IRS updated Form 941 (Rev. January 2009), Employer’s Quarterly Federal Tax Return.

Employers must claim the COBRA premium payments on Line 12a of Form 941. The assistance payments on Line 12a may result in overpayment of taxes, in which employers can elect to offset their payroll tax deposits or claim the subsidy as a refund at the end of the quarter. Employers must also include the number of individuals provided COBRA premium assistance on Line 12b.

In addition to properly filing out the new Form 941, employers must maintain supporting documentation for the tax credit or refund, including:

• Receipt of the employee’s 35% share of the premium, including dates and amounts;
• For insured plans: a copy of invoice or a similar statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier;
• For self-insured plans: proof of the premium amount and coverage provided to the assistance eligible individuals;
• Declaration and date of the former employee’s involuntary termination (which must be between September 1, 2008 and December 31, 2009);
• Proof of each assistance eligible individual’s eligibility and election for COBRA coverage at any time during the period from September 1, 2008 and December 31, 2009;
• A record of all covered employees’ social security numbers, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one (1) or more individuals; and,
• Other documents necessary to verify the correct amount of reimbursement

The filing date for the updated Form 941 will not be extended. Therefore, it is imperative that employers complete Form 941 on time and maintain the proper documentation. The IRS states it will send the new Form 941 to about 2 million employers sometime in mid-March. However, employers can retrieve the updated Form 941 at: http://www.irs.gov/pub/irs-pdf/f941.pdf.

The Department of Labor, Department of Health and Human Services, and the IRS share responsibility for implementing the COBRA requirements. For further details on Form 941, refer to the IRS link: http://www.irs.gov/instructions/i941/index.html.

(For more details on the changes to COBRA read our firm’s prior alert: “The COBRA Clutch: The Stimulus Bill Alters COBRA”).

The COBRA Clutch: The Stimulus Bill Alters COBRA

By Rick A. Hanrahan

On Tuesday February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (“the Act”, i.e. the new stimulus bill) into law. The Act, which is budgeted at $789 billion, is designed to provide an economic stimulus to the ailing economy. The Act also includes the most significant changes to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) since its inception, and will require immediate action by employers and COBRA administrators. The following are some of the major changes to COBRA:

Generally

• The Act provides a subsidy of 65% of the COBRA continuation premiums for eligible individuals for a maximum for 9 months, so that an eligible individual will only have to pay 35% of the COBRA premium in order to get coverage (as opposed to the current maximum 102% of cost)
  
  
• Employers are responsible for paying the 65% subsidized portion of COBRA continuation payments, but will be reimbursed by deducting the amount expended from payroll taxes that they submit to the IRS the next pay period, or if necessary, directly reimbursed for amounts expended
  
  
• The premium assistance period will be shorter than 9 months in certain circumstances, including if an individual becomes eligible for coverage under a major group health plan (such individual is required to notify the employer of eligibility for such other coverage, and will be subject to a penalty of 110% of the subsidy amount for failing to do so)

Eligibility

• An individual is eligible for the new COBRA premium subsidy if he or she is involuntarily terminated from employment from September 1, 2008 through December 31, 2009 and is eligible to elect COBRA during that time
  
  
• Individuals who elected COBRA due to an involuntary termination on or after September 1, 2008 but prior to the date of the Act’s enactment (March 1, 2009 for most plans) are eligible to receive the subsidy on a prospective basis beginning on the date of enactment
  
  
• Individuals who were eligible to elect COBRA due to an involuntary termination between September 1, 2008 and the Act’s enactment (March 1, 2009 for most plans) but did not elect COBRA must be given the opportunity to elect COBRA on a prospective basis, with the maximum coverage period measured from the earliest date that COBRA coverage could have been elected (Employers will have to provide proper notice to such individuals, as described below)
  
  
• An eligible individual’s family members are also eligible for the premium subsidy under COBRA
  
  
• Individuals with modified adjusted gross income that exceeds $250,000 (for joint filers) or $125,000 (for all other filers) will not be eligible for the full premium subsidy. The premium subsidy will phase out for those individuals with an adjusted gross income of $145,000/$290,000. However, employers and insurers can treat all COBRA beneficiaries who have coverage due to involuntary termination during the applicable time period as eligible for the subsidy and receive reimbursement for the 65% of the premiums for coverage provided.

Effective Date

• COBRA’s provisions of the Act become generally effective February 17, 2009 – the date President Obama signed the law into effect
  
  
• The 65% subsidy is effective for the first “period of coverage” for assistance-eligible individuals beginning on or after February 17, 2009 – which, for employers who bill COBRA premiums on a monthly basis, will occur on and after March 1, 2009
  
  
• Since it will likely be impractical to reflect the new subsidy on bills for March 2009 COBRA coverage, the Act provides a two-billing cycle grace period to credit or refund overpaid COBRA premiums

Notice Requirements

• For individuals who became entitled to elect COBRA before the date of enactment, the employer must provide additional notification by April 18, 2009.
  
  
• Employers must modify COBRA election notices or provide separate, supplemental notices to all individuals who become entitled to elect COBRA continuation coverage from September 1, 2008 through December 31, 2009 (After that date, the notices and tracking will have to be changed again to comply with the previous rules)
  
  
• Such notices must describe:
• The availability of the 65% subsidy
• The ability to elect coverage even if an individual refused coverage prior to the Act
• How to elect the subsidy and, if applicable, the right to change coverage options
• Certain other information
  
  
• The notice can be incorporated into the regular COBRA election-rights package or provided through a separate notice that is sent along with the regular COBRA election-rights package

Failure by Employer to Provide Proper Notice to Eligible Employees

• Failure to send timely COBRA election notices to all eligible individuals that complies with the new requirements could subject the employer or plan to a penalty of up to $110 per day under ERISA § 502(c)(1).
  
  
• Failure to comply with the new election notice requirements could also result in adverse tax consequences under § 4980B(b) of the Internal Revenue Code (i.e., excise taxes of $100 per day per notice for each day that the plan administrator fails to comply with COBRA ($200 if more than one qualified beneficiary in the same family is affected)), up to specified maximum amounts

Payroll Tax Offsets

• Employers will have to abide by a fairly comprehensive reporting scheme in order to claim the 65% subsidy, including, but not limited to:
• Attest to the involuntary termination of each assistance-eligible individual
• Report payroll taxes offset for the current period
• Report the taxpayers identification number (TIN) of each assistance-eligible individual
• Report the amount of subsidy received
• Report whether the subsidy covered one or more qualified beneficiaries

Appeals Procedure

• The Act provides that if an individual requests that the group health plan treat the individual as eligible for the COBRA subsidy and such request is denied, the individual may appeal the decision to the Department of Labor (“DOL”), or to the Department of Health and Human Services (“HHS”) pursuant to the Public Health Service Act. DOL or HHS must rule on the appeal within 15 business days.
  
  
• If an appeal is denied by DOL or HHS, the individual could file suit under ERISA § 502(a)(3) for treatment as a subsidy-eligible individual

The Act’s COBRA provisions are comprehensive and will require additional COBRA administration. While there will be pressure to comply with the Act’s requirements, employers should be careful that they do not inadvertently restrict or overstate the number or assistance-eligible individuals.

USCIS Delays New Form I-9 to April 3, 2009

*By Jason Rossiter

The Department of Homeland Security (DHS), U.S. Citizenship and Immigration Services (USCIS) announced today that it is delaying the implementation of new Form I-9 until April 3, 2009, rather than the proposed effective date of February 2, 2009. The DHS determined that the number of comments they received concerning the new Form I-9 constituted an extension of the public comment period for an additional 30 days, until March 4, 2009.

Until the new Form I-9 goes into effect, employers should continue to use the current version of the Form I-9 with the annotation "Form I-9 (Rev. 06/05/07)" on the bottom right-hand corner of the form and the expiration date of June 30, 2009. This form can be downloaded at: http://www.uscis.gov/files/form/I-9.pdf. Employers must also continue to accept any documents presented by employees listed on the current Form's I-9 List of Acceptable Documents.

*Jason Rossiter has extensive experience in all aspects of workplace law, including employee intake and application procedures. For more information about application procedures or any other employment issue, please contact Zashin & Rich at 216.696.4441.

‘Tis the Season: Workers’ Comp Liability for Slips and Falls on Ice

*By Steven P. Dlott

Falling on ice is a common hazard this time of year. Keeping walkways and parking lots free of snow and ice is an almost impossible task in this climate, even for the most safety-conscious employers. Inevitably, an employee will slip on ice either coming to or leaving work.

Generally, employees, with a fixed place of employment who are injured while traveling to or from their place of employment, are not entitled to workers’ compensation benefits. This is known as the “coming and going” rule. The rationale behind this rule is that workers’ compensation protection was only intended for those hazards unique to an employee’s employment and not the risks and hazards encountered by the general public in the normal course of travel to and from employment. As the Supreme Court noted in enunciating this rule, the workers’ compensation system was never intended to make the employer “an absolute insurer of the employee’s safety.”

For example, assume an employer is located in an office building or in an area that is shared with other businesses (e.g., a strip mall). In that situation, since the parking lot or sidewalks used by the employees coming to or leaving work are shared with the other businesses, any fall in those areas would be considered off the employer’s premises. In that situation, the “coming and going” rule would apply and workers’ comp liability would not likely exist. Alternatively, assume an employee is injured on a company owned parking lot. In that case, the “coming and going” rule would not apply, and the employer would be liable for the employee’s injuries.

Nevertheless, in some cases, the “coming and going” rule does not apply. In such cases, an employer could be liable for an employee’s slip on ice at work. One exception to the “coming and going rule” is known as the “special hazard” rule. Under this rule, an employee with a fixed place of employment may be entitled to workers’ compensation benefits if he/she sustains injuries because of a “special hazard.” However, the “special hazard” exception only applies if 1.) the employee’s injury occurred off the employer’s premises; and 2.) the employee can show that there was something distinctive in nature or quantitatively greater about the risk involved that led to the accident.

Another exception to the “coming and going” rule is known as the “zone of employment” exception. Under this exception, courts consider the degree of control the employer had over the injury site. Referring back to the earlier example of a shared parking lot or sidewalk, the employer presumably does not control the maintenance or upkeep of the parking lot. This lack of control means that the employee was not within the “zone of employment” at the time of the injury and no workers’ compensation liability would attach. However, an employer who did exercise control over the maintenance of the parking lot-such as snow removal- could be liable for a fall under the “zone of employment” exception.

Employers can exert control in other ways as well. In addition to the maintenance consideration, courts also look at the means of access to the employer’s place of business. As a result, another exception to the “coming and going” rule can occur where only single entrance or exit to the employer’s place of business exists. The rationale for this exception is that the employee had no alternative as to the path chosen to enter or exit the building. Courts construe this absence of choice as another example of the employer’s control over the access to its business.

Despite these general principles, employer liability for such slips and falls is very fact specific-and often blurred. There are a variety of factors the Industrial Commission and courts look at in evaluating such liability. Seemingly trivial or incidental facts to an employer may often determine whether an employer faces liability at an Industrial Commission hearing. Employers should consult and work with experienced workers’ compensation attorneys to ascertain whether any defenses exist to challenging slip and fall claims.

New I-9 Form & Regulations Effective February 9, 2009

*By Jason Rossiter

The Department of Homeland Security (DHS), U.S. Citizenship and Immigration Services (USCIS) issued a formal notice in the Federal Register that it has revised Form I-9, Employment Eligibility Verification. All employers will be required to use the revised Form I-9 for new employees hired on or after February 2, 2009. The current 2007 version of Form I-9 will no longer be valid.

All U.S. employers are responsible for completion and retention of Form I-9s for each individual they hire for employment in the United States regardless of the individual’s citizenship. The employer must examine original documents presented by the employee (e.g., Social Security card, driver’s license, U.S. passport) to ensure that those documents confirm the employee’s identity and employment authorization.

Form I-9 has three categories of documents that an employer may accept. An employee must present to his or her employer either one document from List A (establishes both identity and employment authorization) or one document from List B (establishes identity) and List C (establishes employment authorization).

In an effort to reduce fraud and improve the integrity of the employment verification process, the USCIS revised Form I-9. The following revisions go into effect on February 2, 2009:

• Valid Unexpired Documents Required.
• Employers cannot accept expired documents to verify employment authorization (e.g., expired passports). However, a document containing no expiration date, such as a Social Security card, is acceptable.
  
  
• 5 documents have been removed from List A of the List of Acceptable Documents:
• Certificate of U.S. Citizenship (Form N-560 or N-561);
• Certificate of Naturalization (Form N-550 or N-570);
• Alien Registration Receipt Card (I-151);
• Unexpired Reentry Permit (Form I-327); and,
• Unexpired Refugee Travel Document (Form I-571).
  
  
• One document was added to List A of the List of Acceptable Documents:
• Unexpired Employment Authorization Document (I-766).
  
  
• New U.S. Passport cards to verify employment eligibility and identity (List A document)
  
  
• The employee does not have to provide his or her Social Security number in Section 1 of Form I-9, unless he or she is employed by an employer who participates in E-Verify.
  
  
• All Employment Authorization Documents with photographs have been consolidated as one item on List A: I-688, I-688A, I-688B and I-766.
  
  
• Employers may now sign and retain Forms I-9 electronically.
  
  
• Social Security cards are not acceptable if they specify on their face that the issuance of the card does not authorize employment in the United States.
  
  
• List A now includes foreign passports containing special machine-readable Visas for certain citizens of the Republic of the Marshall Islands (RMI) and the Federated States of Maicronesia (FSM).
  
  
• Various technical form changes, e.g., Form I-9 now provides separate boxes for the employee to claim status as either a “citizen” or a “national” rather than one box to claim status as a “citizen or national.”

The revised Form I-9 is now available at http://www.uscis.gov/i-9. Employers must use the new Form I-9 or they may be subject to fines, which include civil money penalties of $110 to $1,100 for each form not properly completed.

The USCIS also issued a new 47-page Handbook for employers discussing the changes to Form I-9 and contains copies of acceptable documents. The Handbook can be downloaded with the latest version of Adobe Reader at: http://www.uscis.gov/files/nativedocuments/m-274.pdf.

*Jason Rossiter has extensive experience in all aspects of workplace law, including employee intake and application procedures. For more information about application procedures or any other employment issue, please contact Zashin & Rich at 216.696.4441.